UK Supreme Court in Okpabi Clarifies Parent Company Duty of Care Toward Persons Allegedly Harmed by Subsidiaries
In Okpabi v. Royal Dutch Shell  UKSC 3 (February 12), the UK Supreme Court reaffirmed that a British parent company may in certain circumstances owe a duty of care, for purposes of liability in a suit for negligence, toward persons affected by the operations of its foreign subsidiary. Specifically, the Court found a real issue to be tried as to whether Shell owed a duty of care to persons affected by spills from its subsidiary’s oil pipeline in Nigeria.
The Court’s ruling opens a path to “piercing the corporate veil.” Whether the parent owes a duty of care is not constrained by formalities, such as the separate corporate identities of parent and subsidiary. The Court clarified that a parental duty of care turns instead on business realities, such as whether the parent shares de facto management of a particular activity (e.g., pipeline safety) with its subsidiary.
Okpabi is important both for claimants and for multinational companies -- not only those headquartered in the UK, but also in common law jurisdictions that may follow British precedent...