A landmark case against the Oil giant Shell continues
Last month, a civil claim for environmental harm in the Niger Delta, brought on behalf of 42,500 residents of Ogoniland and the Bille Kingdom against Royal Dutch Shell Plc (RDS) and its subsidiary, Shell Petroleum Development Company of Nigeria Limited (SPDC), reached the UK Supreme Court (UKSC). See here for the background and overview of Okpabi et al. v. Royal Dutch Shell et al. The International Commission of Jurists (ICJ) and the Corporate Responsibility (CORE) Coalition Limited acted as interveners in the case. Focusing on the ICJ and CORE's jointly submitted evidence (hereinafter, the written submissions), this article considers the role of international standards on business and human rights for extraterritorial tort claims.
THE PRECEDENT FOR HOLDING MULTINATIONAL CORPORATIONS LIABLE FOR EXTRATERRITORIAL WRONGFUL CONDUCT
The main legal issue of the case is whether a parent company owes a duty of care to people adversely affected by the operations of its subsidiary. The legal counsel for the claimants relied on the precedent of Vedanta Resources and another v Lungowe and others [2019], where the UKSC held that a duty of care does exist in such circumstances, depending on the facts of the case. Notably, the claimants would have to prove that the parent company exercised a sufficient degree of control over its subsidiary. Since Vendanta Resources issues centralized policy guidelines and made public, corporate social responsibility commitments, the UKSC held that there was an arguable case that Vendanta Resources owed a duty of care to the Zambian farming community for the harms caused by its subsidary. The ICJ and CORE also submitted a joint intervention during the Vedanta proceedings with evidence on comparative law and international standards on business and human rights.
Daniel Leader, a partner at law firm Leigh Day, stated that UK courts are “very receptive” to this kind of strategic litigation. Accordingly, he is “optimistic for the future” of jurisprudence in this field. Indeed, according to obligations under international law, the interveners argue that the United Kingdom must offer protection against the activities of business entities that operate outside of the State's territories but over which the State exercises some regulatory control. A constant theme of Shell's stance has been that the dispute is best suited to be resolved within Nigeria's judicial system, rather than appealing to UK courts. However, Shell's political influence in Nigeria may preclude accountability. Additionally, multinational corporations are known to play on the procedural barriers of the judicial system of the State where the harm occurs.
SHELL’S ‘CENTRALISED EXPERTISE’ AND ‘SYSTEMATIC FAILURES’
In 2011, The United Nations Environment Programme (UNEP) published a study on the impact of oil spills in the Niger Delta, issuing several recommendations for Shell to implement. Further, in 2015, Amnesty International produced a report on the inadequacy of any attempts to clean-up oil spills. Conclusively, there is clear evidence of chronic oil pollution in the Niger Delta.
Richard Hermer QC, acting on behalf of the claimants, pointed to RDS's "centralized expertise provided by the parent and top-down intervention in highly relevant areas to the damage sustained." Additionally, he drew attention to Shell's "systemic failures to either stop oil spills or to remedy their impact." A key question in the case is whether Shell can be held liable for oil spills caused by third parties - namely due to crude oil theft, pipeline sabotage and illegal refining by Niger Delta militants. Shell maintains that the oil spills are a result of criminality and, as such, ought to be dealt with by the Nigerian government. However, Shell's Sustainability Report in 2019 expressed a commitment "to tackle environmental challenges related to oil spills in place with oil theft or sabotage of pipelines, as well as illegal refining" in Nigeria. The written submissions of the interveners describe Shell's Sustainability Reports as a "public subscri[ption]" to "international standards" on business enterprises regarding human rights and environmental protection.
INTERNATIONAL SOFT LAW STANDARDS ON BUSINESS AND HUMAN RIGHTS
The Court of Appeal considered "the importance of multinational parent companies conducting themselves consistently with international standards" as a "doubtful foundation for the imposition of a duty of care." However, in their written submissions, the interveners assert that the Court of Appeal were "wrong to suggest that the international standards, which they considered only very briefly, are irrelevant." Subsequently, the interveners cite the following body of soft law international standards on business and human rights:
The UN Guiding Principles on Business and Human Rights (UNGPs)
The OECD Guidelines for Multinational Enterprises (OECD Guidelines)
The International Finance Corporation's Performance Standards on Environmental and Social Sustainability ("the IFC Standards")
In outlining the above standards, the written submissions refer to due diligence, prevention, mitigation, grievance procedures, and remediation. They further highlight that such responsibilities "extend[s] to the risks presented by third parties … over which an entity does not enjoy control or influence". Similarly, Guiding Principle 13 of the UNGP refers to "human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts."
COMPARATIVE JURISPRUDENCE
The written submissions also identify “developing international jurisprudence” from courts in the Netherlands, Canada, and New Zealand. The cited cases concern business and human rights issues ranging from the health and safety of garment makers to violence perpetrated by security personnel of mining corporations. The "existing trend within both the comparative law jurisprudence and [the UK Supreme Court]" is to impose on a parent company a duty of care to people adversely affected by its subsidiary’s operations, where that parent company exercises a sufficient level of control. Ultimately, determining RDS’s level of control and assumption of responsibility over SPDC will depend upon any evidence of internal correspondence between the companies.
Overall, the ICJ and CORE's written submissions suggest that in following international standards on business and human rights, multinational corporations are:
“simply adhering to the ordinary standards of responsible business in the twenty-first century” and suggest that “it would be a surprise if a reasonable and prudent corporate parent did not assume responsibility for the conduct of its subsidiaries, to at least some extent.”
Josephine is an LLB student at the University of Birmingham, pursuing a specialisation in international law, having recently completed an exchange year with McGill’s Faculty of Law, in Montreal, Canada. Her research interests span public international law, international dispute resolution, transnational law, public law and corporate accountability. She is also committed to access to justice and has volunteered with a number of pro bono organisations.