Claims for overseas environmental harm and human rights infringements proceed in England against UK parent companies
Last month, the UK Supreme Court overturned the judgment of the Court of Appeal and allowed a claim for damages from claimants in the Niger Delta to proceed against Royal Dutch Shell plc and its local subsidiary Shell Petroleum Development Company of Nigeria Ltd. The principle that English courts will hear these overseas claims involving UK parent companies is now becoming established. We look below at the cases that have brought us to this point and the important implications of this development.
Over the last four years, we have been following a series of large multi claimant environmental/human rights claims in the Courts of England.
Those cases are as follows:
- Okapi and others v Royal Dutch Shell plc and Shell Petroleum Development Company of Nigeria Ltd, a claim for damages from claimants in the Niger Delta in connection with oil pollution (the “Okpabi case”);
- Lungowe and others v Vedanta Resources Plc and Konkola Copper Mines Plc, a claim for damages by Zambian citizens in connection with pollution from a copper mine (the “Vedanta case”);
- AAA and others v Unilever Plc and Unilever Tea Kenya Limited, a claim for damages from tea plantation employees in Kenya in connection with violence by third parties (the “Unilever case”);
- AAA and others v Gemfields Plc and Montepuez Ruby Mining Limitada, a human rights claim by miners and members of the local communities in respect of the actions of security personnel at a mine in Mozambique (the “Gemfields case”);
- Municipio de Mariana v BHP Group plc and BHP Group Ltd, a claim in relation to losses sustained in the collapse of the Samarco dam in Brazil in 2015 (the “Samarco” case);
- Kalma & others v African Minerals Ltd, African Mineral (SL) Limited and Tonkolili Iron Ore (SL) Limited, a claim alleging harm by the Sierra Leonean Police during two outbreaks of unrest connected to the defendants’ iron ore mine (the “African Minerals case”); and
- Jalla and others v Shell International Trading and Shipping Company Limited and Shell Nigeria Exploration and Production Company Limited, a claim for damages arising out of a leak from oil infrastructure off the coast of Nigeria (the “Jalla case”).
What is interesting about these claims is that, at first glance, they have nothing to do with England. The claimants live overseas, the alleged injury and damage took place overseas, and the entity alleged to be most directly connected to the injury and damage is foreign registered.
The claims are being brought in England, however, because in all of the cases allegations are made against a UK registered company (usually the parent of the foreign registered company said to be directly involved in the harm). As long as it is satisfied that there is a “real issue” to be tried against the UK company, the court will also hear the claim against the foreign registered company where it is a necessary and proper party to a claim against the UK company.
Progress of the cases
Only one case, the African Minerals case, has made it through to trial where African Minerals was found not to be liable to the claimants. This was confirmed on appeal in 2020 by the Court of Appeal.
The Gemfields case appears to have settled in 2019 before the matter went to trial.
Three of the remaining cases are currently proceeding.
- The Vedanta case and the Okpabi case are proceeding after a long battle on jurisdiction, culminating in decisions by the Supreme Court in each case that the cases could be heard in England. In both cases, the defendants had tried to produce evidence to show that there was no real issue to be tried against the UK parent. The Supreme Court’s response was not that the defendant’s evidence was weak, but that at the early jurisdictional stage it was inappropriate for the Court to engage in detailed examination of the evidence and issues in dispute. As long as the facts and cause of action as pleaded stood a real prospect of success, and nothing was “demonstrably untrue or unsupportable”, the cases could proceed and the evidence would be heard at trial.
- The Jalla case is also proceeding, but many claimants were dealt a serious blow in January 2021 when the Court of Appeal ruled that those claimants had limitation problems in connection with the claim against the UK registered defendant, the knock on effect of which is that their claims against other defendants no longer qualify to be heard in the English Courts. It remains to be seen if or how the remaining claimants will take this claim forward.
The Unilever case is not proceeding. The Court of Appeal determined that there was not a real issue for the UK parent to answer and, unlike the Vedanta and the Okpabi cases, this case did not proceed further to the Supreme Court. Perhaps if this case had been prepared and progressed later, the outcome in relation to jurisdiction would have been different.
The Samarco case was struck out by the High Court in November 2020. The judge found that the proceedings in England were an abuse of process. The key factor was the closely related damages claims in the Brazilian courts that were already underway. The claimants tried to get permission to appeal the High Court’s finding, but this was not granted either by the High Court or the Court of Appeal.
The current position
Claims against UK registered parent companies relating to incidents and damage suffered elsewhere as a result of their subsidiary operations are starting to gain traction. There is a legal mechanism for getting them underway, and claimant lawyers (who understand the law, the process and the funding of these matters in England) are utilising it.
Defendants to these actions are in a difficult position. The cases are very complex and require time and resource to defend. Not only that, there are usually thousands of claimants (over 200,000 in the Samarco case) who are at little costs risk themselves. The momentum that they create places huge pressure on defendants to settle these cases before costs become very significant indeed - even if either or both of the UK company or the overseas subsidiary has a credible defence.
A tactic that defendants had employed to bring claims to an end swiftly before costs escalate and settlement pressure builds, was to challenge jurisdiction for hearing the entire action on the basis that there is not a real issue to be tried against the “anchor” UK entity. However, the Vedanta and Okpabi cases indicate that this is not going to be a fruitful avenue for defendants unless they can show a clear cut case that what is pleaded by the claimants is simply not plausible. Defendants can of course expose the lack of a real issue against the UK entity later on at trial, but it will not have the same knockout blow at that point for the entire action as the overseas subsidiary could still be found to be liable independent of the UK company.
Distancing UK parent companies from the operations of subsidiaries will not necessarily help to mitigate the risk of claims in England connected to the activities of subsidiaries abroad. Even with distancing, it will be hard to show a clear cut case that there is no real issue for the UK entity to answer. Distancing may also lead to damage to the group’s ESG credentials – a most unwelcome side effect in the current climate.
For our previous blogs on these claims please see:
This document provides a general summary and is for information/educational purposes only. It is not intended to be comprehensive, nor does it constitute legal advice. Specific legal advice should always be sought before taking or refraining from taking any action.