Okpabi and others (Appellants) v. Royal Dutch Shell Plc and another (Respondents)

The claimants in this action are the Ogale and Bille communities in Rivers State, Nigeria, representing approximately 50,000 individuals. The claimants allege widespread environmental damage, including groundwater contamination, as the result of oil spills by Shell Petroleum Development Company of Nigeria (SPDC). The two defendants are Royal Dutch Shell Plc (RDS), the UK parent company, and SPDC, a Nigerian-registered subsidiary of RDS. The claims arise under common law negligence and breach of statutory duty, as against RDS because of the significant control and direction it exercises over SPDC’s operations, and as against SPDC because of the damage caused by oil spills.

In order for the claimants to serve SPDC, claimants were required to establish that their claims against RDS, as the principal defendant, raise a real issue to be tried. Both the High Court and the Court of Appeal dismissed this case on this threshold question, finding that there was no arguable case that RDS owed the communities a common law duty of care related to harms caused by SPDC’s operations.

In April 2019, the UK Supreme Court held in Vedanta v. Lungowe that communities in Zambia could sue a UK-based parent company of a mine operator for its environmental harms. With regard to corporate liability, Vedanta was very relevant to the Court’s analysis of the issues raised in this appeal. In light of Vedanta, the claimants structured four Vedanta routes to establish a parent company’s duty of care: (1) taking over the management or joint management of the activity; (2) providing defective advice and/or promulgating group-wide policies; (3) taking steps to implement group-wide policies; (4) holding out that it exercises a particular degree of supervision and control of a subsidiary. In this appeal, the Supreme Court ruled on whether the claimants had an arguable case that RDS owed them a common law duty of care.

Based on the pleaded case and two RDS control frameworks, the Court held that there is a real issue to be tried under Vedanta routes (1) and (3), without any ruling with regards to routes (2) and (4). Despite approving of the claimants’ categorization of the routes, the Court emphasized that these four routes are non-exclusive and explained that establishing corporate liability does not involve a special test for duty of care. In reinforcing the Vedanta judgment, the Court reiterated that this duty of care arises from general principles of tort law. The Court rejected the Court of Appeal’s ruling that group-wide policies could never give rise to a duty of care, noting that this presumption is inconsistent with Vedanta. Moreover, the Court clarifies that the parent company’s exercise of control is merely a starting point when considering the extent to which the parent took over or shared management with the subsidiary. In quoting Vedanta, the Court explains that a duty of care can arise when the parent publicly represents itself as exercising control or supervision even when it does not in fact do so.

In reviewing the Court of Appeal’s decision, the Court also focused on the lower court’s material error of conducting a mini-trial on the evidence and discounting the possibility of future corporate disclosures. Because of the nature of operational control, the Court emphasized the importance of internal corporate documents in determining corporate liability. The Court noted that on summary judgment, the proper inquiry is whether there are reasonable grounds to believe that future disclosures of documents may materially impact the claim’s success. The court should not be drawn into an evaluation of the weight of the evidence at an interlocutory stage. The factual averments made in support of the claim should be accepted unless, exceptionally, they are demonstrably untrue or unsupportable.  Here, the claimants provided two material RDS documents and pointed to other specific documents that may aid their claims but had not yet been disclosed. Thus, the Court held that the claimants’ pleadings and evidence were sufficient to show an arguable case, and this complex evidence should be scrutinized during trial, not on summary judgment.