The International Business Transactions Blog

U.K. Parent Company Liability for Foreign Subsidiary Torts

By Yuki Taylor
Law Student Editor

The first oil well was drilled in the Niger Delta in 1956 by Royal Dutch Shell in collaboration with the British government, four years before Nigerian independence. This land was and remains inhabited by the Ogoni people, who have recurrently protested the displacement of their dwellings in Ogoniland, debilitating pollution caused by oil drilling and transportation, and the failure of the Nigerian government to share oil revenues with the people from whose land the oil is being extracted.  In particular, oil industry activity in the Niger Delta has left its waters so pervasively polluted that Amnesty International calls it one of the most polluted places on Earth.  These conditions have seriously interfered with traditional subsistence farming and fishing, and life expectancy in the region is only 41 years, 10 years lower than the national average.

According to the Nigerian government agency, NOSDRA, there have been 11,342 publicly recorded oil spill incidents, and at least 530,000 barrels have been spewed into the Niger Delta since 2010, caused by sabotage and oil theft or operational issues.  The environmental assessment report published by the UN Environmental Programme in 2011 noted that: “oil contamination in Ogoniland is widespread and severely impacting many components of the environment. Even though the oil industry is no longer active in Ogoniland, oil spills continue to occur with alarming regularity.”  The report further recommended that SPDC should conduct a comprehensive review of its assets in Ogoniland and develop an Asset Integrity Management Plan for Ogoniland’ and a decommissioning plan.  Apparently, no adequate measures have been taken by SPDC or its parent to prevent oil spills from the pipelines. 

The Nigerian government has responded to the protests with brutality, including arbitrary arrests, torture, and extrajudicial killings of protesters, as described in the 2013 U.S. Supreme Court case dismissing claims of Nigerians, Kiobel v. Royal Dutch Petroleum.  In Kiobel, representatives of the Ogoni people sought to hold the Dutch oil extractors liable under the Alien Tort Statute (ATS), allegedly for aiding and abetting the human rights violations committed by the Nigerian military and police forces.  The U.S. Supreme Court denied jurisdiction, holding that the presumption against extraterritorial application of the ATS was not overcome in a case involving foreign defendants engaged in foreign activity.  The Court held that mere a corporate presence in the United States is not sufficient to rebut the presumption.  Nonetheless, Nigeria has constantly been one of the top ten sources of crude oil imports in the United States. 

Nonetheless, litigation continued in the United Kingdom.  On February 12, 2021, the UK Supreme Court found that the lower court “materially erred in law,” regarding the jurisdictional challenges in Okpabi v. Royal Dutch Shell Plc.  The complaint alleged numerous oil spills resulted in massive environmental damage in the Niger Delta, Nigeria, caused by the negligence of Shell Petroleum Development Company of Nigeria Ltd (SPDC), a local oil pipeline operator, and its UK parent company, Royal Dutch Shell Plc.  The question before the court was whether the UK parent owes foreign residents a common law duty of care for acts of its subsidiary in foreign territory.  Reiterating the landmark decision in Lungowe v. Vedanta Resources Plc two years earlier, the UK’s highest court held that the parent entity owes local residents a duty of care if it is substantially involved in the management of its overseas operations.

With the ruling assuring that Nigerian communities can bring their torts claims against the parent of the multinational organization in UK courts, on January 27, 2023, individual claims from over 11,300 residents and 17 institutions including churches and schools were filed in the high court in the UK.  Leigh Day, the representative for the plaintiffs in the case filed in the UK high court, predicts that a full-fledged trial will likely occur in 2024 after a case management hearing set in spring this year.  More than 25 years after the murder of Ken Saro Wiwa and others for protesting Shell’s pollution of their homeland, the Ogoni people will bring the oil giant to trial for half a century of oil spills in Nigeria’s Ogoniland.