Emere Godwin Bebe Okpabi is the tribal leader of the Ogale people in Nigeria. Okpabi brought suit against the Royal Dutch Shell company, an English-domiciled parent company, and its Nigerian subsidiary Shell Petroleum Development Company (“SPDC”) to the High Court in London. The Ogales accused its subsidiary of polluting the tribe’s drinking water through pipeline leaks, and sought damages for clean-up and remediation costs, or alternatively, injunctive relief.
On January 26, 2017, the High Court ruled that it lacked jurisdiction over the suit against both Shell and its Nigerian subsidiary. The ruling potentially represents a significant setback for those seeking to bring cases against UK-based corporations for the actions of their overseas subsidiaries.
Fundamentally, the claimants in Okpabi argued that Royal Dutch Shell is responsible for its Nigerian arm, thereby permitting suit in the UK. However, Shell denied liability and claimed that there was no jurisdiction over the portion of the suit against SPDC because that claim was brought by Nigerian citizens against a Nigerian company for actions taken in Nigeria. Justice Fraser ultimately found the latter argument more persuasive, ruling that “there is simply no connection whatsoever between this jurisdiction and claims brought by the claimants.”
While the Nigerians and human rights organizations have argued that, absent suit against the parent corporation, communities will not receive effective compensation, Justice Fraser concluded that there was not enough evidence in the record to substantiate this claim, writing that, “the evidence before the court is that access to justice in Nigeria would not be denied to the claimants if these proceedings were not to continue in London.”
The claimants had largely relied upon Vedanta, a prior case where Zambian citizens sought damages due to pollution and environmental damage from copper mining. In that case, Justice Coulson found that there was jurisdiction over a parent holding company as well as its subsidiary in Zambia.
While there are similarities between the two cases, the High Court held that key differences distinguished Vedanta from Okpabi. Conditional fee arrangements are unlawful in Zambia and legal aid would not be granted to the claimants in the Vendata case. This virtually eliminated the possibility of bringing legal proceedings against the subsidiary in Zambia. On the other hand, such fee arrangements are permitted in Nigeria. The Court also rejected the claimant’s argument that the Nigerian legal system is too slow, finding no evidence that the Nigerian system is doing anything but trying to improve the speed by which they deal with cases.
Even though the portion of the suit against SPDC would, on its own, appear to lack jurisdiction, Justice Fraser did hold that there was jurisdiction over Royal Dutch Shell because it is domiciled in England. However, because of the relationship between Royal Dutch and SPDC, he also held held that Royal Dutch owed no duty of care over the actions of its subsidiary, and so could not be liable.
Various factors played a role in the court’s duty of care analysis. First, Royal Dutch did not hold shares in SPDC directly. It held shares in another company, Shell Petroleum NV, and that company held shares in SPDC. Second, Royal Dutch is not permitted to conduct operations in Nigeria. Third, Royal Dutch’s activities do not overlap with those of its subsidiaries. It does not conduct operations in Nigeria or anywhere else in the world. Thus, it simply holds shares as an investment company.
While the decision in Vedanta might have originally been understood as a relaxation of jurisdictional hurdles to suit against parent holding companies for the actions of their subsidiaries abroad, the Okpabi decision clarifies that this is a highly fact-specific inquiry and suggests Vedanta represents the exception rather than the rule. Ultimately, it sets up two hurdles to future suits in English courts for corporate human-rights abuses abroad. First, claimants will find it more difficult to establish jurisdiction in English courts over the actions of foreign subsidiaries. Even if they pass this hurdle, the claimants will still need to establish direct liability of the parent holding company for the foreign actions of its subsidiary.
The Vedanta decision has already been appealed and the same is expected in the Okpabi case. How the Court of Appeal deals with these jurisdictional challenges may have significant ramifications for future suits within the English judicial system regarding corporate human rights abuses committed abroad.
Shyam Shanker is a second-year student at Columbia Law School and a staff editor for the Journal of Transnational Law. He graduated from the University of Georgia where he studied Biology and Political Science.