In Okpabi & Others v Royal Dutch Shell & Another the Supreme Court has applied the principles around parent company liability it set out in Lungowe v Vedanta Resources Plc, to hold that a claim against an English domiciled parent was “clearly triable” and therefore the claim against its Nigerian subsidiary should proceed to a full trial on the merits.
The Supreme Court allowed the appeal by the Ogale and Bille communities in Rivers State, Nigeria and overturned the Court of Appeal’s decision that there was no real issue to be tried against Royal Dutch Shell in respect of alleged losses caused by the operation of a pipeline by its Nigerian subsidiary. Accordingly, the English court has jurisdiction to hear the claim, which may now proceed to a full trial.
The Supreme Court has delivered its latest ruling in the developing area of parent company liability for the acts or omissions of overseas subsidiaries, handing down judgment in the case of Okpabi and others (Appellants) v Royal Dutch Shell Plc and another (Respondents).
The case concerns a claim by a group of more than 40,000 citizens of the Ogale and Bille communities in Rivers State, Nigeria who allege they suffered loss caused by the operation of an oil pipeline and its associated infrastructure by Royal Dutch Shell (“RDS”)’s Nigerian subsidiary Shell Petroleum Development Company of Nigeria (“SPDC”).
SPDC challenged the jurisdiction of the English courts to hear the claim. At first instance and in the Court of Appeal it was found that there was no real issue to be tried as against the English parent defendant, which is one limb of the test to establish jurisdiction against the Nigerian subsidiary.
In making its decision to allow the claim to proceed in England, the Supreme Court found it had not been shown on the basis of the submissions and the evidence that the asserted facts in the particulars of claim were demonstrably untrue or unsupportable. Therefore, it had not been established that there was no real issue to be tried as against the English parent company. In particular the group’s vertical corporate structure and how authority was delegated clearly raised triable issues.
Additionally, it was found that the majority in the Court of Appeal had made a number of material errors of law, most significantly by conducting a mini trial, which had led to its decision being based on the evidence produced before it at this stage, rather than on whether the pleaded case disclosed an arguable claim.
In the judgment, Lord Hamblen warned in particular against reaching a decision in cases of this sort on the basis of a very limited number of documents disclosed in the initial stages of litigation, stressing the importance of internal corporate documents in cases concerning alleged liability of a parent company for the acts/omissions of its subsidiary.
The Supreme Court found that the Court of Appeal had made other errors of law, including:
The Supreme Court’s judgment reaffirms the principle established by Vedanta that an English parent company may bear liability for the acts/omissions of its overseas subsidiaries.
It was not really in doubt following the Vedanta judgment, but the Supreme Court has now made crystal clear in Okpabi that there should not be a mini trial when determining jurisdiction, but an assessment should be made on the case as pleaded on whether there is a reasonable question to be tried.
The Supreme Court also re-emphasised the following principles: