On 12 February 2021, the UK Supreme Court handed down judgment in the landmark case of Okpabi and others v Royal Dutch Shell plc and others [2021] UKSC 3. The case provides powerful clarification of the law regarding: (i) international environmental harm; and (ii) the duty of care that a UK parent company may owe on behalf of its foreign subsidiary.

The case dates back to 2015 when 40,000 Nigerian individuals, whose home town had allegedly been degraded by oil leaks from an oil drilling operation in the Niger Delta, filed a claim in the Technology and Construction Court. The claim was brought against Royal Dutch Shell plc (i.e. the UK parent company – "Shell") in addition to its Nigerian subsidiary (Shell Petroleum Development Company of Nigeria Ltd – "SPDC") whose pipelines and infrastructure discharged substantial amounts of crude oil onto the adjacent land contaminating the local water supply making it unfit for drinking, washing or agriculture. 

It was originally ruled that the Courts of England and Wales did not have jurisdiction to hear the case because the claimants could not present a properly arguable case that Shell owed them a duty of care. That decision was upheld on appeal in 2018 where the Court of Appeal further stated that there was no arguable case that Shell owed the claimants a common law duty of care to protect them against a foreseeable harm caused by the operation of SPDC.

As a result, the further appeal to the Supreme Court focused on the circumstances in which a UK-domiciled parent company of a multi-national group of companies may owe a common law duty of care to individuals who suffer serious harm (be that physical harm, environmental harm or otherwise) as a result of the actions of one of its subsidiaries.

At the heart of the appeal was: (i) whether the Court of Appeal had made a material error in law; and (ii) if so, whether there was a real issue to be tried in substantive proceedings.

The Supreme Court ruled, as in another of the UK’s landmark environmental cases Vedanta v Lungowe [2019] UKSC 20, that the assessment of whether or not a claimant has an arguable case should be more readily accepted unless demonstrably untrue. Moreover, the Supreme Court clarified that where a parent company exercises significant control over material aspects of a subsidiary's actions the parent will likely owe a duty of care to those affected by the subsidiary's actions. 

The key takeaway from the decision is that the bar for claimants commencing proceedings in the English courts against parent companies and their international subsidiaries for alleged harms caused in other jurisdictions is lower than previously thought. We are therefore likely to see more cases proceed to merits hearings (including the critical disclosure phase). That's a boon for English litigation professionals and for victims of environmental harm worldwide.

This judgment does not provide the Okpabi claimants with anything except the opportunity to proceed in the English courts with the substantive claim. But it will have potential claimants and defendants reflecting on the possibility of parent companies being pursued for environmental degradation claims given the possibility that the parent company may now shoulder at least some of the liability.