1. INTRODUCTION
The case centres primarily on the issue of environmental damage caused by the activities of Shell Petroleum Development Corporation of Nigeria (hereinafter referred to as SPDC) in the Niger Delta regions of Ogale and Bille Communities, Rivers State. The claimants allege oil spills from pipelines owned and operated by the corporation in their respective communities. These spills have caused environmental damage, contaminating the waters, making it unsafe for drinking, fishing, and agricultural purposes, and causing untold hardship to the way of life of the citizens. The Appellant/Claimant claimed that the joint venture run by the Nigerian National Petroleum Corporation (NNPC), Total E&P, Nigerian AGIP Oil, and SPDC was run by the latter on behalf of NNPC. The Appellant/Claimant sued Royal Dutch Shell (hereinafter referred to as RDS), the parent company of SPDC, citing that a duty of care was owed to them by Shell based on significant control over the material aspects of SPDC’s operations, including the imposition of health, safety, and environmental standards. They claim the non-implementation of these standards has caused grievances to them. In addition to the claims against RDS, the appellant/claimant alleges that SPDC is also liable for damage caused by those oil spills under various Nigerian statutory and common law causes of action. The UK Supreme Court, in reaching its decision, relied considerably on its decision on a similar issue in Lungowe v Vedanta Resources plc [2019] UKSC 20; [2020] AC 1045.
2. The ISSUE OF JURISDICTION OVER FOREIGN ENTITIES:
The parties involved in the dispute are foreign, with both Claimants (Applicants) living in Nigeria and one Defendant (Respondent), Shell Petroleum Development Company, being a company registered to carry on business in Nigeria. The question then arises, why do the United Kingdom courts assume jurisdiction over these foreign entities? The general philosophy behind this action lies in the commonwealth’s shared legal system entrenched in the common law. More specifically, there are several ways in which the English Courts can claim jurisdiction over a dispute. Key provisions which are often relied on are:
a. If the parties agree to a contract subject to English jurisdiction.
b. If a defendant is “domiciled” in England.
c. In tort claims, where England is the place where the “harmful event” occurs or may occur.
d. Where there are multiple defendants, if there is one defendant who is subject to English jurisdiction, the claimant can treat them as an ‘anchor defendant’ and obtain permission to sue any other “necessary or proper party” to that claim.
It is also important to note that in the instant case, one of the parties, i.e., Royal Dutch Shell (RDS) (an Anglo-Dutch-originated partnership headquartered in London), is incorporated in the United Kingdom and, as such, is treated as a British entity. This empowers the UK Supreme Court with jurisdiction to adjudicate on legal disputes concerning the company. The issue of choice of law before the courts was put to bed as both parties agreed that the governing laws of Nigeria would be treated the same as the laws of the United Kingdom. The aim of foreign direct liability cases against parent companies is said to be two-fold, thus holding the parent company responsible for irresponsible business practices and aiding parties to litigate against foreign subsidiaries as co-defendants. Companies that carry out business outside the United Kingdom but are registered in the United Kingdom under the Companies Act 2006 will be considered as present in the United Kingdom.
Previously, the issue of Forum non-conveniens would be raised by the company to persuade the court not to accept jurisdiction and transfer the case to the appropriate venue. This has been checked by the decision of the European Court of Justice in Owusu v Jackson , prohibiting the English courts from applying the doctrine in cases against English-domiciled companies.
3. DOES A DUTY OF CARE EXIST?
The rule in Caparo v Dickman was clear in laying down a procedure for determining proximity to ensure that the imposition of a duty of care would not be too remote. The test requires the court to ask three questions, thus;
a. Was the damage reasonably foreseeable?
b. Was there a relationship of proximity between the defendant and the claimant?
c. Is it just, fair, and reasonable to impose a duty in the situation?
This principle serves as a compass for the courts in determining the issue of proximity in the duty of care. The Claimant in this instant case asked the court’s leave to serve SPDC outside the jurisdiction, emphasizing that SPDC is the necessary and proper party on which the claim on RDS rests. The UK Supreme Court, in its wisdom, has ruled previously that when the issue of jurisdiction is to be determined at the onset of the trial, the summary judgment test must be applied. The Summary Judgment test simply employs the appellant to answer some questions, thus: Whether there is a real issue to be tried? And consequently, whether there is a real prospect of success at trial. The test is entrenched in Altimo Holdings and Investment Ltd v Kyrgyz Mobil Tel Ltd (2012) 1 WLR 1804.
The Court, however, citing its decision in Vedanta’s case, did not apply the proximity test on whether it would be just or fair to impose a duty of care but rather stated that it was the wrong approach as the liability of parent companies concerning the activities of their subsidiaries is not, of itself, a distinct category of liability in common law negligence. The court also went further to state that “It raises no novel issues of law and is to be determined on ordinary, general principles of the law of tort regarding the imposition of a duty of care”. The appellant, reforming its argument before the court with the Vedanta ruling, claimed that the duty of care arises from the following:
a. RDS taking over the management or joint management of the relevant activity of SPDC;
b. RDS providing defective advice and/or promulgating defective group-wide safety/environmental policies, which were implemented, of course, by SPDC;
c. RDS promulgating group-wide safety/environmental policies and taking active steps to ensure their implementation by SPDC, and
d. RDS holds out that it exercises a particular degree of supervision and control over SPDC.
With the tailoring of the appellant’s case in line with the court’s ruling in Vedanta’s case on parent company liability, the court ruled that the defendant does owe the appellant a duty of care and that the high court has jurisdiction to try the matter on its merits. The reason for this decision is based on the fact that RDS has significant control over the activities of SPDC. In overruling the High Court, it highlighted that the court erroneously conducted a mini-trial in the evaluation of the evidence before it, but ought to answer the preliminary question of jurisdiction without making findings on evidence. The Court has gone on to emphasize stringently that, as the Vedanta case makes clear, there is no special test applicable to the tortious responsibility of a parent company for the activities of its subsidiary.
Furthermore, the Supreme Court highlighted that while formal binding decisions are taken at the corporate level, these decisions are taken based on prior advice and consent from the vertical business or functional line, and organizational authority generally precedes corporate approval. The respondents contended, however, that RDS could only delegate responsibility for its corporate governance and group-wide strategy functions. The RDS Control Framework relied on evidence by the Appellant showing that the CEO and the RDS board have a wide range of responsibilities, including “the safe condition and environmentally responsible operation of Shell’s facilities and assets”.
4. APPLICABLE LAW FOR PARENT COMPANIES IN NIGERIA
The Companies and Allied Matters Act 2020 defines a foreign company to mean a company incorporated elsewhere than in Nigeria. Section 78(1) provides that a foreign incorporated company that wishes to carry on business in Nigeria shall ensure to fulfil the requirements of incorporation as a separate entity. In the case of parent companies and subsidiaries, however, the Companies and Allied Matters Act defines a subsidiary in Section 381(1) (A-C) to mean any company that,
(a) is a member of the company and controls the composition of its board of directors;
(b) holds more than 50% in the nominal value of its equity share capital;
(c) The first-mentioned company is a subsidiary of any company that is another company’s subsidiary
The act states a company is deemed to be the holding company of another if the other is its subsidiary, and a body corporate is deemed to be the wholly-owned subsidiary of another if it has no member except that other and that other’s wholly-owned subsidiaries are its or their nominees.
RECOMMENDATIONS AND CONCLUSION:
The ruling in Okpabi’s case could, through persuasive precedent, be applied to cases in the higher courts of records in Nigeria. The issue, however, would be: under what circumstances could this precedent be best suited? It is recommended that, in cases of bankruptcy or involuntary winding up of a subsidiary, the principle in Okpabi’s case could be extended to the parent company where the subsidiary has committed a tort against a third party and has been declared bankrupt by the court. A similar principle is applied in mergers and acquisitions, in the practice of successor liability, where subsisting civil liabilities of companies before a merger or acquisition are transferred to the new entity.
In conclusion, while the judgment of the court in Okpabi’s case may open up the floodgates and in the words of Fraser J. (UK High Court Justice) “impose liability in an indeterminate amount for an indeterminate time and to an indeterminate class”, it is still a vital attempt taken by the courts to create a remedy to protect third parties who might be dissatisfied with the ordinary remedies available in its forum and consequently intend to take a more didactic approach to the issue. Some claimants might wish to expand the bandwidth and implement a wholesome industry review of corporate liability. While there might be foreseeable challenges in enforcing a judgment in the event of a successful suit, the recognition of the jurisdiction of English Courts over the dispute and the reckoning of a “triable” issue means that the claimant would still have to prove at the lower courts that there has been a breach of duty of care which has resulted in damage to them. The final judgment of the courts in this dispute has the potential to have far-reaching effects in Nigeria and the wider common law world.
Daberechukwu Ogbuishi, LL.B (Nig), MBA (Rome) (In-view)
