Thanks to Dr. Rachel Widdis of Trinity College Dublin for contributing again to the blog, this time with a post on the recent Okpabi decision from the United Kingdom Supreme Court. Last week Rachel wrote a post on Irish Coalition on Business and Human Rights’ outline proposal for human rights and environmental due diligence legislation in Ireland.
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In Okpabi v Shell, the UK Supreme Court affirmed that a parent company may owe a duty of care to communities negatively impacted by the operations of a foreign subsidiary, and advanced further. This case will now proceed for over 42,000 claimants from two communities in the Niger Delta alleging oil spillages have caused environmental damage affecting their livelihoods and health.
The Court builds forward on its 2019 decision in Vedanta v Lungowe, and upon principles developed over decades in the English courts. While challenging, these cases remain crucial to advancing accountability, particularly given deficiencies in alternative routes to remedy. They are based in the tort of negligence, yet beyond the field of business and human rights may have escaped wider focus. The jurisprudence of the English courts has already proven persuasive in other jurisdictions, and the closest common law jurisdiction is of course, here. I have previously argued that such foreign direct liability (FDL) litigation is substantively feasible in Ireland, whilst inhibited by existing practical barriers.
The Vedanta and Okpabi decisions concern jurisdiction for third country claimants to bring proceedings against a UK parent company and its foreign subsidiary. Okpabi establishes standards for this stage in proceedings, including that a ‘mini-trial’ should be avoided, information from internal corporate documents material to the claim may emerge later, and assertions of fact should be accepted unless ‘demonstrably untrue or unsupportable’. Although there is long road to deliver remedy, the guidance from Okpabi should simplify the long complex jurisdictional battles which have impeded access to justice. Appropriately, cases should now move more swiftly to disclosure and merits or settlement.
Jurisdiction pivots upon the claimants convincing the court there is a ‘real prospect of success’ in the claim against the subsidiary, and an arguable case the parent company owes a duty of care. In Vedanta, the Court adopted a pragmatic view to an arguable case under the law where harm occurred, where influenced by English common law. Okpabi reaffirmed parent company duty of care is to be assessed by reference to the general principles of tort law, stating the Court of Appeal in Okpabi ‘was wrong to analyse the case by reference to the threefold test set out in Caparo’. There is pragmatism and openness, with both cases rejecting pre-limiting the circumstances in which a duty of care may arise. In Vedanta, the primary focus was on what the parent company did to take over, intervene, or advise its subsidiary in a relevant area. In a second wave, Okpabi endorsed that a parent company may be liable based upon representations it makes regarding its ‘supervision or control of its subsidiaries’. In practical terms this is a game-changer.
Gaps between published policies or commitments made and actual practice were already under scrutiny (see here and here). Post Okpabi, a disconnect between companies’ ‘talk’ and their ‘walk’ presents legal risk exposure. There are now two distinct axes of potential liability, sufficient intervention by the parent with a subsidiary, and representations by it regarding supervision and control of its subsidiaries. Okpabi is preferred to the narrower approach of the Court of Appeal of the Hague in its recent ruling on the merits in the Shell Nigeria cases. Restricting duty of care to actual intervention by the parent risks promoting a ‘hands-off’ stance towards subsidiaries, contrary to the UNGPs and responsibilities to conduct due diligence.
It is to be hoped the Irish courts would explore the UK Supreme Court approach to control, intervention, and representations by a parent company concerning its subsidiaries.
For Ireland, parallels may be drawn with eventual FDL cases, from a substantive perspective. Firstly, grounding jurisdiction turns on markedly similar tests and procedural provisions to Vedanta – Okpabi. Again, claimants must establish a ‘good cause of action’ and that the subsidiary is a ‘necessary and proper party’ to the claim. Arguably, Irish courts would also consider parent company duty of care as coherent with the circumstances in which a third party may be liable for the actions of another in Dorset. For example, the approach of Hogan J, as he then was, in Ennis commenced with reference to Dorset. It is to be hoped the Irish courts would explore the UK Supreme Court approach to control, intervention, and representations by a parent company concerning its subsidiaries. Similarly, in determining whether Ireland is the forum conveniens and connecting factors to the country where the harm impacts, they may give weight to practical impediments affecting whether justice would be available to the claimants there.
The English courts have established grounding tenets, and developed principles over decades through to Vedanta and Okpabi. Key markers are now established, and would arguably prove persuasive in Ireland. If similar cases could be brought before the Irish courts, the severe impacts on people and communities typically underlying FDL cases and widely accepted international standards, in conjunction with the Irish Constitution and international human rights law arguably form a compelling backdrop to judicial assessment.