As mentioned above, this decision is the third in a line of recent Court of Appeal decisions addressing the extent of parent company liability for the actions of its foreign subsidiaries.
In October 2017, the Court of Appeal held that 1,826 Zambian villagers could bring a claim in the English courts against UK-based Vedanta Resources Plc (Vedanta) and its Zambian subsidiary Konkola Copper Mines Plc.
Separately, in February 2018, the majority of the Court of Appeal (Sales LJ dissenting) held in favour of English-incorporated Royal Dutch Shell Plc (RDS) and its Nigerian operating subsidiary, Shell Petroleum Development Company of Nigeria Ltd, refusing residents of the Niger Delta region the ability to bring a claim in the RDS) and its Nigerian operating subsidiary, Shell Petroleum Development Company of Nigeria Ltd, refusing residents of the Niger Delta region the ability to bring a claim in the UK on the basis that the claimants had failed to put forward a good arguable case that RDS owed them a duty of care.
In each of the three cases, the Court of Appeal referred to two types of case where the test for duty of care might be made out in respect of a parent company
- Where the parent has in substance taken over the management of the relevant activity of the subsidiary in place of (or jointly with) the subsidiary’s own management; or
- Where the parent has given relevant advice to the subsidiary about how it should manage a particular risk.
In Vedanta, the Court concluded that (i) had been successfully made out by the claimants on the basis that Vedanta had: published a sustainability report which emphasised how the Board of the parent company had oversight over its subsidiaries; entered into a management and shareholders agreement under which it was obligated to provide various services to KCM, including employee training; provided health, safety and environmental training across its group companies; provided financial support to KCM; released various public statements emphasising its commitment to address environmental risks and technical shortcomings in KCM’s mining infrastructure; and exercised control over KCM, as evidenced by a former employee.
In Okpabi the Court of Appeal made the opposite conclusion on the evidence. The Court emphasised that the issuance of group-wide mandatory policies by a parent company is not in itself sufficient grounds to establish proximity. It is necessary to show that the parent company had assumed “complete” or “joint control” over the relevant operations, for example by enforcing the mandatory policies.
In the present case, the claimants conceded that (i) (which had been successfully argued in Vedanta) was not applicable and the Court of Appeal found that the claimants were “nowhere near being able to show that they have a good arguable claim” against Unilever on the basis of (ii). While Sales LJ’s dissenting opinion in Okpabi raises questions about the degree of control necessary to establish proximity, the facts and evidence in Unilever seem comparatively unambiguous. UTKL provided enough evidence to convince the Court that it did not rely on Unilever for direction in the design or implementation of its conflict risk management policies.