In this post, Frances Gordon-Weeks and Kristyna Muhlfeitova from CMS comment on the decision of the UK Supreme Court in the matter of Okpabi and others v Royal Dutch Shell and another [2021] UKSC 3 which concerned whether and in what circumstances the UK-domiciled parent company of a multi-national group of companies may owe a common law duty of care to individuals who allegedly suffer serious harm as a result of alleged systemic health, safety and environmental failings of one of its overseas subsidiaries as the operator of a joint venture operation.

On 12 February 2021, the UK Supreme Court handed down its judgment in Okpabi and others v Royal Dutch Shell and another [2021] UKSC 3 overturning the decision of the lower courts and granting the claimants’ appeal. In a unanimous decision, the Supreme Court found that there was a real issue to be tried against Royal Dutch Shell Plc (“RDS”) as it was at least arguable that RDS, incorporated in London, owed a duty of care in negligence to claimants based in Nigeria with respect to the activities of its local subsidiary Shell Petroleum Development Company of Nigeria Limited (“SPDC”).  In reaching its decision, the Supreme Court relied heavily on its judgment in Vedanta Resources PLC and Anor v. Lungowe and Ors [2019] UKSC 20, where it held that there was an arguable case that a UK domiciled company, Vedanta, owed a duty of care to Zambian-based claimants in respect of activities carried out by its Zambian subsidiary.

This judgment confirms that companies may be held accountable in negligence to third parties for environmental and human rights harms caused by their overseas subsidiaries. The decision is part of a broader judicial trend whereby courts are increasingly more prepared to hold parent companies responsible for the acts of their overseas subsidiaries. This development is of significance to companies operating in industries attracting a high degree of environmental, social, and corporate governance risk.


The claimants are the members of communities in Nigeria, together comprising 42,500 individuals. The claimants allege that oil spills from pipelines operated by Shell Petroleum Development Company of Nigeria Ltd (“SPDC”), a Nigerian registered company, caused widespread environmental damage, including water and ground contamination. As a result, the natural water sources could not be used for drinking, fishing, agricultural and recreational purposes. The claimants argue that the oil spills were caused by the negligence of SPDC and that RDS, the UK domiciled parent company of SPDC, owed the claimants a duty of care as it exercised significant control over material aspects of SPDC’s operations. It is the claimants’ case that the mandatory health, safety and environmental policies, standards and manuals imposed by RDS failed to protect the claimants from the foreseeable harm of oil spills resulting from SPDC’s negligence.

The claimants served a claim form on RDS and applied for permission to serve on SPDC outside the jurisdiction, on the basis that SPDC was a “necessary or proper party” to the claims against RDS under paragraph 3.1(3) of Practice Direction 6B. Both defendants contested the jurisdiction of the English courts and SPDC applied to have the service of the claim form out of the jurisdiction set aside. The key issue in the proceedings was whether jurisdiction against SPDC could be established on the basis that the claims against RDS, the anchor defendant, gave rise to a real issue to be tried meaning that they would have a real prospect of success under the summary judgment test.


At first instance, the High Court struck out the claimants’ case concluding that it was “not reasonably arguable that there is any duty of care upon RDS”. Applying the three-step test for establishing a new duty of care formulated in Caparo Industries plc v Dickman [1990] UKHL 2, Fraser J found that no relationship of proximity existed between RDS and the claimants based in Nigeria and that it would not be ‘fair just and reasonable’ to impose a duty of care on RDS.

In reaching its decision, the High Court applied the principles stipulated by Arden LJ in Chandler v Cape Plc [2012] EWCA Civ 525 regarding the circumstances in which a parent company could incur liability in negligence to third parties arising out of the operations of its subsidiary. Fraser J focused in particular on the enquiry whether “the parent company is better placed, because of its superior knowledge or expertise” to avoid the particular type of harm incurred by the claimants, and whether the subsidiary placed reliance on the superior expertise of the parent. The claimants relied on corporate documents including global policies of the Shell Group, Stock Exchange announcements and public statements of RDS to argue their case. The Court found that the provision of group environmental policies was not relevant to the analysis as to whether a duty of care existed as they related to the Shell Group as a whole rather than to RDS as such. The Court also found that public statements and Stock Exchange announcements were made to comply with the Listing Rules and therefore should not be characterised as an assumption of a duty of care by a parent company over a subsidiary.   Ultimately, the Court concluded that “there is nothing performed by RDS by way of supervisory direction, specialist activities or knowledge, that would put RDS in any different position than would be expected of an ultimate parent company”, as well as that “there is simply no evidence that SPDC ever did rely upon RDS” in terms of guidance for its operations in Nigeria.


The sole issue for the Court of Appeal to determine was whether Fraser J was wrong to conclude that there was no arguable case that RDS owed a duty of care to the claimants in Nigeria.

Contrary to the High Court’s approach, Simon LJ found that the corporate literature disregarded by the High Court on grounds that it was merely produced to comply with the Listing Rules, could be of relevance. However, having reviewed all of the corporate documents, Simon LJ was “far from persuaded” that “RDS exercised material control over SPDC’s material operations”. He dismissed the claimants’ argument that the policy documentation showed that Shell Group was designed to impose a wide-ranging degree of direction from the centre, finding that what it in fact showed was a “standardisation of policies and practices”. He agreed with the High Court that “imposing a duty of care on RDS would… impose liability in an indeterminate amount for an indeterminate time, to an indeterminate class”. In relation the claimants’ arguments about indications of what further evidence might emerge on disclosure, Simon LJ observed that “jurisdiction is founded on a properly arguable cause of action and not on what may (or may not) become a properly arguable cause of action”. In relation to the various group-wide policy documents, Simon LJ considered that “the concern was to ensure that there were proper controls and not to exercise control”. Ultimately, Simon LJ concluded that the “exiguous evidence” presented by the claimants “does not come close to supporting the sort of proximity on the basis of which the court might find a duty of care to exist in favour of the claimants”. Sir Geoffrey Vos, delivered a separate but concurring judgment, which echoed the conclusions reached by Simon LJ.

Lord Justice Sales delivered a dissenting judgment in favour of the claimants raising the following key points:

  1. If RDS was found to owe a duty of care to the claimants, it would not expose RDS to liability of an indeterminate amount to an indeterminate class, as the claimants who lived in proximity to SPDC’s pipelines were a limited and defined class of individuals meriting protection by means of a recognition of a duty of care.
  2. Fraser J was wrong to exclude the corporate literature as irrelevant as this evidence established that “the group was aware of particularly acute problems in Nigeria, in respect of which it could be inferred that RDS would wish to exert direct central control if SPDC were perceived as being ineffective in managing the risk of oil spills”.
  3. The Shell Group’s business is organised not according to corporate entities but according to ‘Businesses’ and ‘Functions’, such as ‘Exploration and Production’ or ‘Upstream’, whose regional managers report directly to the CEO of RDS. In light of this, “it is arguable that RDS is conscious that it has the practical means of asserting executive power from the centre of the group to control at least some aspects of management of operating companies and that RDS has the will and intention to do so”.

Following the Court of Appeal’s ruling, the Supreme Court considered parent company liability in Lungowe v Vedanta Resources plc [2019] UKSC 20. Deviating from the Court of Appeal’s approach, the Supreme Court ruled, inter alia, that there was no presumption against parent company liability in tort for the actions of its subsidiaries and there was no “limiting principle” that the adoption of group-wide policies could not by itself give rise to a duty of care in tort. In light of this ruling, the Okpabi case was appealed to the Supreme Court.


The Supreme Court unanimously found that the Court of Appeal materially erred in law and was wrong to conclude that there was no real issue to be tried.

The Supreme Court identified the following errors in law:

  • Mini-Trial: The majority of the Court of Appeal was drawn into conducting a mini-trial on substantive issues which led it to adopt an approach inappropriate for an interlocutory application. It was inappropriate for the Court of Appeal to consider the weight of the evidence and exercise a judgment based on that evidence rather than on the merits of the pleaded case. The appropriate approach would have been to accept the facts unless there were exceptional circumstances showing that the assertions are demonstrably untrue or unsupportable.
  • Importance of disclosure: The mini-trial approach also led the majority of the Court of Appeal to make inappropriate determinations as to the documentary evidence. The Court of Appeal was wrong to discount the prospect of there being further relevant evidence on disclosure and did not make reference to the importance of internal corporate documentation to the issue of whether the parent company had sufficiently intervened in the management of the subsidiary. It was incorrectly assumed by the Court that since the high-level documentation provided so far did not confirm that RDS exercised control over operations of SPDC, it followed that further documentation disclosed would be unlikely to do so. The Court wrongly preferred the evidence of RDS where there was no disclosure by RDS or possibility for cross-examination of RDS’ evidence. This was an erroneous approach as operational control would most likely be revealed in operational documentation which were not disclosed by RDS at this stage but would have been disclosed at trial. This was especially the case as the claimants had listed specific internal documents likely to be material to the claim which were disclosed by RDS and SPDC in related Dutch proceedings.
  • Summary judgment test: When considering the prospect of further relevant evidence being produced on disclosure, the Court of Appeal should have applied the summary judgment test of whether the claim had a “real prospect of success”. Simon LJ did not address this question and Sir Geoffrey Vos applied a stricter test of whether there was a “clear prospect that new material will become available before the trial which is likely to give the claimants a real prospect of success”. Instead, the proper approach would have been to ask whether there “are reasonable grounds for believing that disclosure may materially add to or alter the evidence relevant to whether the claim has a real prospect of success?”
  • Focus on overall control: The majority of the Court of Appeal inappropriately placed emphasis on proof of the exercise of control by RDS. This was inconsistent with Vedanta, where the emphasis was on the extent to which the parent did takeover or share management of the relevant activity with the subsidiary. Parent companies control their subsidiaries which gives them an opportunity to get involved in the management of the subsidiaries’ activities. However, control is not equivalent to de facto management. De jure control may rest with a subsidiary while de facto management may be delegated to the parent. Furthermore, as was established in Vedanta, it is possible for a duty of care to arise where the parent company does not exercise control over the subsidiary, but it holds itself out as exercising such control.
  • No distinct category of liability: The Court of Appeal was wrong to apply the Caparo test to the case as the parent/subsidiary relationship is not a distinct category of liability in negligence as was provided in Vedanta. The applicable standard is that of a normal summary judgment application.
  • No limiting principle: The Court of Appeal incorrectly indicated that the promulgation by a parent company of group-wide policies could never in itself give rise to duty of care as it was clearly established in Vedanta that no such “limiting principle” existed.
  • No special test or presumption for parent company liability: Lord Briggs’ judgment in Vedanta made clear that there was no special test for establishing legal responsibility in tort of a parent company for the acts of its subsidiary and that there is no presumption against such liability. Hence, it was inappropriate for the majority of the Court of Appeal to make generalisations based on the parent/subsidiary relationship.

The Supreme Court concluded that the Court of Appeal was wrong to determine that there was no real issue to be tried. The Court endorsed the approach taken by Sales LJ in his dissent, finding that the fact that the Shell Group was organised along “Businesses” and “Functions” lines rather than corporate structure was relevant to establishing whether it was arguable that a duty of care was assumed by RDS. With reference to the claimants’ pleaded case, witness evidence and the corporate documentation, which was deemed irrelevant by the High Court, the Supreme Court found the claim gave rise to a real issue to be tried, namely the “extent to which delegated authority of RDS was involved and exercised in relation to decisions made by SPDC”, which would need to be resolved at trial following disclosure of RDS’ internal corporate documentation.


The Supreme Court’s ruling highlights that the bar for determining whether a claim against a parent company for the acts of its overseas subsidiary is arguable is relatively low. The judgment follows the recent trend of courts being more willing to entertain the idea that parent companies may owe a duty of care to those affected by the actions of their subsidiaries and accept jurisdiction even if those acts took place overseas. Recent examples of this trend include the seminal Vedanta case, as well as Begum v Maran [2021] EWCA Civ 326, where the Court of Appeal found that there is an arguable case that the English former owners of a ship had a duty to a widow of a worker killed during the dismantling of the ship. The Court of Appeal has also recently allowed an appeal from the High Court in Municipio de Marina &others v BHP Group Plc [2020] EWHC 2930, where a class action claim by Brazilian claimants following the collapse of the Fundão Dam was struck out as abuse of process. This again shows that the appellate courts are increasingly interested in exploring this developing area of law.

This trend is also reflected in other jurisdictions such as Canada, where the Canadian Supreme Court found that a Canadian parent company may be liable for customary international law breaches by a mining company in Eritrea its subsidiaries had stakes in (Nevsun Resources Ltd v Araya, 2020 SCC 5). Although the Court only found that the claim was arguable, just as was the case in Okpabi, and the Canadian courts are yet to decide on the merits, it was still a significant step towards parent company liability for harms caused overseas.  Similar cases have also been brought in the US, France and New Zealand. Most notably, in proceedings related to the Okpabi case, a Dutch appeals court has found SPDC liable for oil spills in Nigeria and ordered it to pay unspecified damages to farmers by way of compensation.

We are yet to see whether the English courts will follow in the steps of the Dutch appeals court and find RDS or SPDC liable when judging the merits of the Okpabi claim. Nevertheless, the Supreme Court’s approach in Okpabi and Vedanta has already eased the door open for potential claimants to bring claims of this nature against English-domiciled companies.