It has long been held that parent companies, as separate legal entities, can rarely be held liable for the actions of their subsidiaries. Arguments around the degree of supervision, direction and control required to trump limited liability have proved extremely difficult.
There are now increasing numbers of claims being made in the areas of environmental pollution, health & safety and human rights which could have widespread ramifications for the potential accountability of big corporates around the world.
The recent case of Okpabi V Shell is a good example.
Background
This case concerned a legal battle that started back in 2016 in which Shell argued it could not be held liable for the harm caused by one of its Nigerian subsidiaries, where serious health and environmental issues have been caused in the local community due to pollution. Few places exemplify the issues surrounding corporate impunity better that than those in relation to the Niger Delta. According to statistics produced by Amnesty International, the Nigerian Government recorded 3,028 oil spills between Shell and ENI in 2011, equating to 52 million barrels of oil.
The communities affected by the pollution instructed lawyers to sue Shell for compensation. Shell relentlessly defended that the link between the subsidiary company’s actions and the parent company was too remote to prove a chain of causation for negligence purposes. The communities argued that Shell was directly liable for Shell Nigeria, whilst Shell, denying any clear evidence of control, operational or otherwise, refused to disclose any of the documents relating to how it operated in relation to its subsidiary. Six years and many court cases later the Supreme Court has overturned restrictive liability and made it clear that the scope for potential liability of a parent company for its subsidiaries is much broader than it has been previously, and English courts will have jurisdiction to entertain a claim in relation to a subsidiary’s actions.
Clearly, these cases have to date tended to focus on international pollution and environmental issues involving large corporates and one can see the potential for more of the same particularly with climate change being such a critical issue. Along the way however these legal decisions on the liability and responsibility of a parent company for its subsidiary company activities could have more general implications.
If you would like to discuss any of the issues raised in this article, Eloise Hall, Paralegal, would be delighted to hear from you. You can reach Eloise on 01872 226990 or you can email her eloise.hall@murrellassociates.co.uk.
The information provided in this article is a summary for general information purposes only and does not constitute legal or other professional advice and cannot be relied on as such. Any law quoted in this article is correct as at the above date. Appropriate legal and financial advice should be sought for specific circumstances before any action is taken.
