When can a parent company be responsible for acts of its subsidiary? (HRH Emere Godwin Bebe Okpabi v Royal Dutch Shell Plc)

Original news

HRH Emere Godwin Bebe Okpabi & Ors v Royal Dutch Shell Plc & Anor [2017] EWHC 89 (TCC)

In this case, the High Court considered the circumstances in which a parent company could be liable for the acts and/or omissions of its subsidiary.

Background

In this case proceedings were brought in the High Court against Royal Dutch Shell plc (RDS), the ultimate holding company of the Shell Group, and its operating subsidiary, Shell Petroleum Development Company of Nigeria Ltd (SPDC). The claimants were seeking damages arising as a result of ongoing pollution and environmental damage caused by oil spills emanating from the defendants' oil pipelines and associated infrastructure in Nigeria.

The defendants argued that the English courts did not have jurisdiction to hear the case and that the approach of bringing a claim against the parent company, RDS, was a device being used cynically by the claimants to bring claims, that would otherwise have no connection whatsoever with England, to trial in the English courts. A central issue in the case was therefore whether RDS could be liable in tort for the acts/omissions of its subsidiary.

Existing caselaw

Mr Justice Fraser considered a number of previous cases on this issue and said that the starting point was the three-fold test set out in Caparo Industries Plc v Dickman [1990] 2 AC 605, namely that:

• the damage should be foreseeable
• there should exist between the party owing the duty and the party to whom it is owed a relationship of proximity or neighbourhood
• the situation should be one in which it is 'fair, just and reasonable' to impose a duty of a given scope upon the one party for the benefit of the other

Fraser J noted that in Chandler v Cape Plc the Court of Appeal had stated that in appropriate circumstances the law may impose on a parent company responsibility for the health and safety of its subsidiary's employees. Those circumstances included situations where:

• the businesses of the parent and subsidiary were in a relevant respect the same
• the parent had, or ought to have had, superior knowledge on some relevant aspect of health and safety in the particular industry
• the subsidiary's system of work was unsafe as the parent company knew, or ought to have known
• the parent knew or ought to have foreseen that the subsidiary or its employee