Implications for liability of parent companies over subsidiaries (Okpabi v Royal Dutch Shell)

Implications for liability of parent companies over subsidiaries (Okpabi v Royal Dutch Shell)
Commercial analysis: Christa Band, partner, and Stephen Lacey, senior PSL, at Linklaters LLP, analyse how the Court of Appeal determined the circumstances in which a parent company will be liable for the negligence of its subsidiaries. In particular, they look at the impact of group policies and identity in such determinations.
Okpabi v Royal Dutch Shell 

[2018] EWCA Civ 191

What is the case about?

Okpabi is the latest judgment in a series of recent cases relating to when a parent company may be held liable for the activities of its subsidiaries. It involved claims brought in the English courts against Royal Dutch Shell Plc (RDS) and a Shell Group company, Shell Petroleum Development Company of Nigeria Ltd (SPDC), by local communities affected by oil in the Niger Delta.

The claimants’ case in respect of RDS was that it owed them a duty of care in negligence for alleged acts/omissions committed by SPDC. This issue was before the court as part of a challenge to the court’s jurisdiction in which it had to assess whether the claim was at least arguable, and whether it should be allowed to proceed.

What did the Court of Appeal decide?

At first instance, the judge had held that the case against RDS was not strong enough to proceed. The Court of Appeal upheld this result by a two to one majority. The leading judgment was given by Simon LJ, with whom Vos LJ largely agreed. He identified proximity as the central issue in the case. In that respect, he looked at a number of centralised, or group level, control features by which the claimants sought to establish that RDS had control over SPDC’s operations. In his view, however, none of the evidence went far enough to show any exercise of actual control over SPDC’s operations by RDS that would be sufficient to establish a duty of care. He distinguished between a parent company which controls

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