Transnational business and human rights developments in courts and legislatures

Elise Groulx Diggs
Doughty Street Chambers, Washington, DC
​​​​​​​e.groulxdiggs@doughtystreet.co.uk

* This article is correct as of May 2021.

This year is already an active one for transnational business and human rights in Europe and the United States. In February, a landmark decision from the United Kingdom Supreme Court, Okpabi v Shell opened the possibility for new jurisprudence in parent companies’ duty of care toward victims of alleged human rights violations. The United States Supreme Court heard oral arguments in December for Nestlé v Doe, which puts transnational corporate aiding and abetting under the limelight. Meanwhile, in February and March, Germany and the Netherlands signalled legislative intent for business and human rights by introducing new bills introducing mandatory human rights due diligence. This short contribution gives a summary description of these latest developments.  

Okpabi v Shell[1]

In Okpabi and Others v Royal Dutch Shell, the UK Supreme Court allowed a claim against Shell to proceed; it alleged that the parent company Royal Dutch Shell (RDS) owed foreign claimants a duty of care.

Claimants were farmers in Nigeria who sued RDS, incorporated in the UK, and its Nigerian subsidiary. Claimants argued that RDS owed them a common law duty of care for pollution and environmental degradation suffered following oil spills in the Niger Delta since RDS exercised significant control over the operations of its Nigerian subsidiary. Both the High Court and the Court of Appeal had earlier held that the case could not proceed on jurisdictional grounds because the claimants failed to establish an arguable case that RDS owed them a duty of care since RDS did not control its Nigerian subsidiary.

The Supreme Court disagreed. The Court first emphasised that the Court of Appeals erred in its approach by focusing on the substantive arguments and weight of evidence, rather than on the question of whether the pleaded case had an arguable claim. The Court then redirected the inquiry by writing that ‘control’ is not the principal issue but rather just the ‘starting point’ when analysing a parent company’s duty of care (para 147). The Court explained that the inquiry should look at whether ‘the parent did take over or share with the subsidiary the management of the relevant activity (here the pipeline operation)’ (para. 147). On these grounds, the Court concluded that the claimants did provide an arguable case and that it should go forward and move on the merits.

This ruling builds on the precedent set by Vedanta Resources Plc v Lungowe[2] in 2019, a case where farmers from Zambia similarly sued a UK-domiciled parent company for personal injury, damage to property and loss of income. In Vedanta, the Supreme Court clarified that whether a parent company has a duty of care depends on ‘the extent to which, and the way in which, the parent availed itself of the opportunity to take over, intervene in, control, supervise or advise the management of the relevant operations (including land use) of the subsidiary’ (para 49).  

Although not a judgment on the merits of the case, Okpabi is significant for providing jurisdiction for transnational claims against a UK-domiciled parent company.

Nestlé v Doe[3]

In the US, the Supreme Court heard oral arguments in December in the case of Nestlé USA, Inc. v Doe, the latest to test the extraterritorial reach of tort claims against parent corporations. The case was brought by former child slaves trafficked from Mali to Ivory Coast to work in cocoa plantations. Claimants argued that the Swiss parent corporation, although not directly owning the plantation, aided and abetted the human rights violation. The Court of Appeals previously held that, although the alleged violation occurred abroad, defendants allegedly perpetrated the conduct from corporate headquarters in the US, which made it domestic conduct with jurisdiction in US courts. During oral arguments at the Supreme Court, justices focused on the meaning of extraterritorial conduct. Justice Sonia Sotomayor questioned whether corporate decisions made in the US are sufficient ties to the US for a case to get a forum in the US. When a decision is rendered, this case will be another landmark in American jurisprudence, clarifying what ‘aiding and abetting’ means in the context of transnational supply chains and the reach of tort claims beyond the shores of the country.

At issue was also the question of whether US corporations can be held accountable under the alien tort statute (ATS). To recognise a new cause of action under the ATS, the international law norm at issue must be specifically defined and universally recognised. This means the court must determine whether a universal norm exists under international law about corporate liability and whether corporations have a recognised legal personality in international customary law.

Defendants argued that there is no such norm under international law and therefore the ATS, under which this claim was brought, only applies to natural persons, not to corporations. Justice Elena Kagan seemingly countered this line of argument, posing the hypothetical of why it is that if a single natural person engages in slave trading or a group of natural persons engage in slave trading, a victim will find jurisdiction in US courts, but if that group of slave traders form a US corporation, that they would be shielded from liability.[4]

Implications

Both Okpabi and Nestlé address issues of jurisdiction and not the merits of the cases. Okpabi does not establish that UK-domiciled parent companies systematically owe a duty of care for transnational human rights violations. However, the judgment goes in the same direction as Vedanta and opens the door to situations when parent corporations may owe such a duty of care and the relevant factors to look for when conducting such an inquiry. Similarly, Nestlé will clarify whether corporate activity in the United States is enough to grant a forum for transnational violations of human rights abroad.

Although not a judicial trend, transnational legal liability for parent corporations have come up in other courts this year and has become notable in many jurisdictions. Both Okpabi and Nestle are important milestones that signal increased judicial action in this arena.

For instance, the Court of Appeals of England and Wales recently held that shipbreakers in Bangladesh may be owed a duty of care in English courts since the parent company is a UK-domiciled company.[5] A court of appeals in the Netherlands also held that there is jurisdiction for Nigerian claimants to bring a claim against the parent company Shell in the Netherlands and that Shell is liable for damages resulting from the oil spills.[6]