Two Critical Issues in the UK Business and Human Rights Litigation
Dalia Palombo, London School of Economics Fellow
The UK Supreme Court granted leave to appeal the case Lungowe v Vedanta and is now considering whether or not to grant the same permission in Okpabi v Royal Dutch Shell. These two cases are the result of years of business and human rights litigation based on the duty of care that UK parent companies may owe towards victims of extraterritorial human rights abuses committed by their subsidiaries. In these cases, the Supreme Court may provide further guidance as to two critical issues that Lubbe v Cape, Chandler v Cape, and Thompson v The Renwick Group Plc left unanswered and that are fundamental to understand the implications of the parent company’s duty of care on business and human rights litigation. First, it is unclear what the relationship between a parent company and a victim should be for the former to owe a duty of care towards the latter. Second, it is unclear what level of proximity is required between a parent and its subsidiary for the former to be accountable for the human rights abuses committed by the latter. The answers to these questions may close or open the door to business and human rights litigation in the UK.
1. The Relationship between the Parent Company and the Victim
The duty of care would be, traditionally, based on the relationship between those owing the duty and the victims of torts. However, Chandler v Cape modified this assumption when it held that the parent company owed a duty of care towards its subsidiary’s employee on the basis of the relationship of control exercised by the parent over the subsidiary. This shift, arguably, implies that the parent company may owe a duty of care not only towards the employees of the group (with whom the parent may reasonably have a direct relationship), but also towards any third party involuntary tort victim (with whom the parent is unlikely to have any relationship). In fact, if the duty of care depends on the relationship between parent and subsidiary company, rather than parent company and employee, there are reasons to argue that the parent may owe a duty of care towards a third party with whom it has no direct relationship. This interpretation seems correct also on the basis of the dicta of Lubbe v Cape, where the House of Lords suggested that a parent company could owe a duty of care towards tort victims who were not employees.
2. The Relationship between the Parent Company and the Subsidiary
If Chandler v Cape shifted the focus from the relationship between parent company and victim to the one between parent company and subsidiary, it left open for debate what level of proximity between parent and subsidiary would entail a duty of care of the former for the torts committed by the latter. In fact, Chandler v Cape did not establish a proximity test, but it instead stated that the relationship between a parent company and its subsidiary must be analysed on a case by case basis. This has opened a Pandora box leaving scholars and litigators wondering what the bases to establish vicinity between parent and subsidiary are. While Chandler v Cape seemed open to considering numerous factors to establish a proximity relationship, the subsequent case Thompson v The Renwick Group Plc limited the elements that could be taken into account to prove vicinity between a parent and its subsidiary. The litigations in Lungowe v Vedanta and Okpabi v Royal Dutch Shell has so far not cleared up this issue because the High Court and the Court of Appeal made opposite decisions as to the arguability of these apparently similar cases. They ruled in favour of the victims in Lungowe v Vedanta and for the corporate group in Okpabi v Royal Dutch Shell. It should be recalled that these different outcomes pertained only to the issue of jurisdiction, and UK courts analysed in this restrained framework the arguability of the cases.
The Supreme Court will face a difficult task to address these questions and will hopefully provide desired clarity as to the future of business and human rights litigation in the UK.