Written for The Student Lawyer. Originally published here under the title 'Should claimants be able to bring an action against a defendant domiciled in a different country?'
In February 2023, roughly 11,000 people from Ogale in Nigeria filed a claim in the UK High Court against Shell, in addition to the one already lodged at that same court by people in the Ogale and Bille communities in Nigeria. They are seeking compensation for environmental damage as a result of SPDC (Shell’s subsidiary in Nigeria) operations that have led to oil spills around their homes and as such has negatively affected their livelihoods. On hearing this story, coincidentally, I listened to a Burna Boy song called ‘Another Story’. At the beginning of the song is a clip lifted from a documentary made about the history of Nigeria. In sum, the narrator talks about how ‘Nigeria started off as a ‘business deal… between a company and a government’. The Niger company, the narrator goes on to say, is still functioning today, ‘but is better known as Unilever’. However, the recording was cut off, the narrator saying that this is another story. This article is an exploration of what that story could be. Not specifically about Unilever, but about the impact of the actions of large Western parent companies like Shell on African countries. It is also about how and where they should be held liable for any actions that cost too much for a profit.
What is the impact of the actions of large Western companies on African countries?
It is indisputable that the investment of companies, such as Shell, in African industries has contributed significantly to the growth of not only those sectors but the economy at large. According to Shell’s 2020 sustainability report, their subsidiaries have employed 11,700 people, have paid $900,000,000 in taxes to the Nigerian government, awarded contracts valued at $800,000,000 to Nigerian suppliers and helped fund All On, a Nigerian non-profit that supports renewable energy startups. Basically, Shell’s activities in Nigeria not only generate a profit for them but also have a positive spill-over effect on Nigerian communities and the Treasury. The report also indicates that since 2002, SPDC, one of Shell’s subsidiaries, has reduced gas flaring by 90%.
Gas flaring is one of the negative impacts of Shell’s activities on Nigerian communities. Gas flaring is the burning of natural gas produced as a result of the drilling of oil. When gas is burnt it produces toxic substances that pollute the air. According to a Centre for Constitutional Rights report, there were 100 flare sites in Nigeria in 2009. Aside from gas flaring, the report also alleges that Shell colluded with the Nigerian government to quell popular protests against its activities in the Ogoni region. This quelling involved what the report describes as ‘deadly force’ used against those involved in the protest.
Although the main purpose of companies such as Shell when investing in countries like Nigeria is to make profit and grow their business. This has come at a high cost for some communities in which they operate, whose livelihoods, negatively impacted, do not make it to their balance sheet. Granted, steps have been taken by Shell to minimize their externalities and even support local projects. An inevitable consequence of big business is the exploitation of people and the environment. The next two sections will address how law is used to remedy these problems.
Legally, how are parent companies held to account?
The most common way of holding a parent company liable for the actions of its subsidiaries is via tortious liability. This requires a duty of care to be conferred on the parent company. In the case of Chandler v Cape Industries [2012], the court held that a parent company can be held liable for the actions of its subsidiaries if the relationship between the parent company and the subsidiaries is such to give rise to a duty of care. In Vedanta Resources v Lungowe [2019], it was explained how such a duty of care should come about, using the traditional guidance* in Caparro. That is, assessing whether the harm is reasonably foreseeable, assessing the proximity between the claimant and the defendant and considering whether it is reasonable for the court to impose a duty of care.
Actions that could result in a duty of care being imposed, as set out in Chandler, include the parent company knowing that the operations of the subsidiary were unsafe, the parent and the subsidiary having intersecting business operations, the parent company having, or ought to have had, more information about the health and safety risks in the particular industry and the parent company knowing or should have foreseen that the subsidiary or its employees were dependent on it to use that superior knowledge.
As many of the subsidiaries operate outside the UK jurisdiction, before a case is brought due to an action of the subsidiary, it must first be established that there is a triable case in the UK. A triable case may be found, as was in Vedanta, if the parent company exercised sufficient control over the subsidiaries activities. In Okpabi v Shell [2021], the UK Supreme Court found that the Ogale and Bille communities had a “good arguable case” that Shell was responsible for the pollution of their area as a result of the actions of SPDC due to their public commitments to health and safety standards and their corporate global policy frameworks.
Legally, parent companies are different entities to their subsidiaries. Intuitively, thus, it would only make sense for the claims against a subsidiary to be brought against the subsidiary only, in the jurisdiction in which it is based, not the parent company as well in the country of the parent company. Although, as we shall now see, sometimes there is good reason to bring the claim against both entities.
Where should the parent company be held to account?
The courts dealt with this issue in Vedanta where the claimants were from Chingola District in Zambia and where Vedanta’s (parent company) subsidiary (Konkola Copper Mines- KCM) owned a mine from which the pollution came. Lord Briggs, on the issue of jurisdiction, whether the trial should take place in the Zambian or the British courts, reasoned that it would be most practical and reasonable for the case to take place in Zambia. This is because of the high costs of the claimants travelling to the UK to give evidence, pollution of the waterways happened in Zambia and because the KCM is a Zambian company and therefore liable under Zambian laws. Furthermore, the judgement of the Zambian court would be enforceable in the UK in any case.
Despite all of this, the courts held that the trial should proceed in the UK. Why?
It all turned on the issue of substantive justice. Lord Briggs reasoned that although it would be most practical for the case to be tried in Zambia, there was a risk that the claimants wouldn’t be able to get substantive justice if this happened. This was due to there not being any conditional fee arrangements or legal aid available for them in Zambia and the legal teams in Zambia not being experienced enough to handle such a complex case. Therefore, Lord Briggs held that the case should be tried in the UK.
Prima facie, although careful to say that the Zambian judiciary is independent and competent, Lord Briggs essentially made a blanket statement that the entire legal profession in a country is not capable of handling such a claim. I think this is dangerous. It is simply not sustainable for African claimants to have to bring their claims to the UK or the relevant foreign country in question in order to get justice – something that ought to be available in their own country. I struggle to accept that an entire legal profession in a country cannot take such a claim for the reason of their own incompetence. I wonder, when or what level of competence would be sufficient for substantive justice not to be at stake if the case is to be brought in Zambia.
Conclusion
The expansion of foreign companies activities to African countries, like Nigeria, have proved beneficial to them and the communities in which they are situated – providing jobs, contributing to government revenue and supporting local enterprise. Nonetheless, this has come at a high cost to the environment and the communities around it, especially their health and wellbeing. Look at a documentary made, inspired by another Burna Boy song, Whiskey, that is an example of the devastating effects of air pollution on Nigerian people. It is possible to hold parent companies of subsidiaries liable by establishing a duty of care, especially since many have group wide policies. This encourages top-down enforcement of good standards, and, when claims are successfully brought, leads to significant compensation for the victims. However, holding a company liable in one’s own country is extremely difficult, not to mention having to do it in another jurisdiction entirely. It is in the interests of justice that claims can be brought against parent companies in their jurisdictions, so that they are encouraged to live up to the slogan of ‘responsible business’. But this is not sustainable for the simple reason that people in developing economies cannot keep on looking to the West for justice when it should be available in their own land. How to go about bringing justice closer to home – that is another, closely related, story.
* Note, Lord Bridge in Caparro was keen to stress that he was not setting out a strict step by step test for finding a duty of care.
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