Supreme Court allows appeal in jurisdictional challenge relating to parent company duty of care

On 12 February, the Supreme Court handed down its judgment in a high profile jurisdictional challenge relating to group claims brought against Royal Dutch Shell plc and its Nigerian subsidiary in connection with alleged pollution in the Niger Delta: Okpabi and others v Royal Dutch Shell plc and Shell Petroleum Development Company of Nigeria Ltd [2021] UKSC 3.

While set in a non-financial context, this decision will be of great interest - and potential concern - to all UK-domiciled financial institutions who might be considered to be at risk of claims being brought which allege a duty of care in relation to the actions of their foreign subsidiaries or branches.

The Supreme Court unanimously allowed the claimants’ appeal, finding that the English court does have jurisdiction over the claims. It held that (1) the Court of Appeal materially erred in law by conducting a mini-trial in relation to the arguability of the claim at the jurisdiction stage, and (2) it was reasonably arguable that the UK domiciled Shell parent company owed a duty of care to the claimants.

The decision provides further consideration of the circumstances in which a parent company may owe a duty of care to those affected by the acts or omissions of its foreign subsidiary, an issue that the Supreme Court considered in its recent judgment in Vedanta Resources PLC and another (Appellants) v Lungowe and others (Respondents) [2019] UKSC 20 (which was heavily relied upon by the Supreme Court in this case).

The latest Supreme Court judgment on this question will not provide comfort to UK financial institutions exposed to such parent liability claims. In particular, the decision is likely to constrain defendants (as part of a jurisdictional challenge) from seeking to challenge the factual basis on which claims are advanced. As a result, many defendants will be concerned that they are more vulnerable to weak and speculative claims being allowed to proceed in the English courts.

For a more detailed analysis of the decision, see our litigation blog post.