Okpabi v Royal Dutch Shell plc [2021] UKSC 3

Nigerian communities sued Royal Dutch Shell (RDS) and its subsidiary SPDC for oil spill pollution. The Supreme Court held that the claimants had an arguable case that RDS owed them a duty of care due to its control over SPDC's operations, allowing the case to proceed to trial on jurisdiction grounds.

Facts

The appellants were members of Nigerian farming and fishing communities in Rivers State, Nigeria, who alleged that numerous oil spills from pipelines operated by Shell Petroleum Development Company of Nigeria Ltd (SPDC) caused widespread environmental damage and contamination. SPDC was a Nigerian subsidiary of Royal Dutch Shell Plc (RDS), a UK-domiciled parent company. The claimants sought to establish that RDS owed them a common law duty of care due to its alleged exercise of significant control over SPDC’s operations, including health, safety and environmental standards.

Procedural History

The claimants sought permission to serve proceedings on SPDC outside the jurisdiction, relying on RDS as the anchor defendant. Fraser J dismissed the claims, finding no arguable duty of care. The Court of Appeal majority upheld this decision, though Sales LJ dissented. Permission to appeal to the Supreme Court was granted following the Vedanta decision.

Issues

The key issues were: (1) whether the Court of Appeal materially erred in law in its approach; and (2) whether the claimants had established a real issue to be tried regarding RDS’s duty of care to them.

Judgment

The Supreme Court unanimously allowed the appeal. Lord Hamblen delivered the leading judgment, finding that the Court of Appeal had erred by conducting an inappropriate mini-trial rather than applying the correct summary judgment test.

“The factual averments made in support of the claim should be accepted unless, exceptionally, they are demonstrably untrue or unsupportable.”

Lord Hamblen emphasised the importance of focusing on the pleaded case and whether it disclosed an arguable claim:

“Where, as will often be the case where permission for service out of the jurisdiction is sought, there are particulars of claim, the analytical focus should be on the particulars of claim and whether, on the basis that the facts there alleged are true, the cause of action asserted has a real prospect of success.”

The Vedanta Framework

Applying the principles from Vedanta Resources plc, Lord Hamblen confirmed that parent company liability is determined by ordinary tort principles, not special tests:

“… the liability of parent companies in relation to the activities of their subsidiaries is not, of itself, a distinct category of liability in common law negligence.”

Whether a duty arises depends on the extent to which the parent “availed itself of the opportunity to take over, intervene in, control, supervise or advise the management of the relevant operations… of the subsidiary.”

Evidence and Disclosure

The Court found that the majority below had wrongly dismissed the relevance of future disclosure. Lord Hamblen stated:

“… the court cannot ignore reasonable grounds which may be disclosed at the summary judgment stage for believing that a fuller investigation of the facts may add to or alter the evidence relevant to the issue.”

The RDS Control Framework and HSSE Control Framework documents demonstrated RDS’s organisational structure and mandatory standards, raising triable issues about the exercise of control over SPDC.

Implications

This decision is significant for parent company liability in multinational corporate groups. It confirms that promulgation of group-wide mandatory policies and standards can give rise to a duty of care in appropriate circumstances. The judgment reinforces the principle that jurisdiction challenges should not become mini-trials, and that claimants should not be denied access to justice based on incomplete evidence before disclosure. The case underscores the importance of internal corporate documents in establishing the actual relationship between parent and subsidiary companies in negligence claims.

Verdict: Appeal allowed. The Supreme Court held that the claimants had established an arguable case that RDS owed them a duty of care, and the matter was remitted for determination of the remaining jurisdictional challenges.

Source: Okpabi v Royal Dutch Shell plc [2021] UKSC 3