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Holding listed issuers to their word – for now anyway… Developments from the UK Court of Appeal on parent company liability for impacts abroad

Last year I wrote about a feature of the decision of the English and Wales High Court of Justice in HRH Okpabi v Royal Dutch Shell Plc[1], a case where residents of the Niger Delta brought a claim in negligence against Royal Dutch Shell (RDS), an issuer incorporated in England and listed on the LSE, and its Nigerian operating subsidiary, Shell Petroleum Development Company of Nigeria Ltd. (SPDC).

The Nigerian plaintiffs sought damages for losses allegedly caused by oil spills from the defendants’ oil pipelines and associated infrastructure in the Niger Delta. In order to sue SPDC in England, the plaintiffs were required to show that they had a good arguable claim against RDS. If there was a good arguable claim against RDS, it could then be treated as the so-called “anchor defendant” and a claim could be included against SPDC as a necessary or proper party.

The High Court was asked to consider whether affirmative statements made by RDS in continuous disclosure documents were sufficient to give rise to a presumption that a duty of care, between RDS and those affected by the actions of SPDC, had been assumed. The High Court found that public disclosure statements did not weigh heavily, if at all, in grounding a duty of care. The High Court’s reasoning included, in part, the following:

“This is because it would be counter-productive to the availability of information to investors about the activities and aspirations of listed companies if the contents of generic statements … were to be held against different companies within the corporate group.”

It was and remains my view that, except where an issuer resiles from its public statement(s), there should be no question of the reliability of the disclosure statement at issue, only a question of the weight to be given to it in the broader context of the evidence when considering whether a direct duty of care is arguable. In my previous post, I interpreted the High Court’s finding as being largely policy based, and I observed that this aspect of the decision failed to properly consider the regulatory context in which the public statements were made.

Earlier this year, the UK Court of Appeal weighed in on the issue.[2] A majority of the Court of Appeal (Sales LJ dissenting) dismissed the plaintiffs’ appeal and held that English courts lacked jurisdiction to try the claims against SPDC because there was no real issue between the claimants and RDS sufficient to make it an anchor defendant. However, Sir Geoffrey Vos, Chancellor of the High Court, found that Mr. Justice Fraser of the High Court had made a general error of principle, among others, in his treatment of continuous disclosure statements made by RDS.

Sir Geoffrey found as follows:

“… whilst compliance with stock exchange disclosure standards cannot of itself be characterized as an assumption of a duty of care, that does not inform the question of whether a statement made for compliance purposes is capable of giving rise to a duty of care. If anything, the regulatory context means that such statements are more likely to be true, and so should be accorded greater evidential weight. The judge should, I think, have focused on the content of the statements to establish whether they were capable of establishing an arguable duty of care, rather than rejecting them in their totality because of their context.”[3] [Emphasis added.]

It has been a busy year for the UK Court of Appeal with direct liability cases. In addition to dismissing the Okpabi appeal in February of this year, last week the Court of Appeal upheld a 2017 decision of the High Court to decline jurisdiction in AAA v Unilever, a case about acts of violence carried out on tea plantation workers in Kenya (more to come on that one).[4] Finally, in October 2017, the Court of Appeal upheld the High Court’s decision in Lungowe v Vedanta Resources Plc, dismissing Vedanta Resources’ jurisdictional challenge to claims by residents of the Zambian city of Chingola that Vedanta’s Zambian operating subsidiary had polluted local waterways and caused personal injury.[5]

In March of this year, the UK Supreme Court granted Vedanta’s application for permission to appeal.[6] The appeal is expected to be heard later this year and the outcome will be highly anticipated by the both the UK and Canadian bars. The recent guidance from the English courts on parent company liability for impacts abroad will no doubt be relied on in Canada. No Canadian court has fully considered the possibility of a direct duty of care owed by a Canadian parent for the actions of its subsidiaries abroad; and, the attribution of liability at the parent level for alleged wrongful conduct at the subsidiary level are at issue in each of Choc v Hudbay Minerals Inc., Garcia v Tahoe Resources Inc. and Araya v Nevsun Resources Ltd.[7], which are currently making their respective ways to trial in Canada.


[1] [2017] EWHC 89 (TCC). My previous post about Okpabi can be found here.

[2] [2018] EWCA Civ 191.

[3] Ibid, at para 188.

[4] [2018] EWCA Civ 1532; and see [2017] EWHC 371 (QB).

[5] [2017] EWCA Civ 1528; and see [2016] EWHC 975 (TCC).

[6] UKSC 2017/0185.

[7] The Supreme Court of Canada recently granted Nevsun leave to appeal the 2017 decision of the Court of Appeal for British Columbia upholding the dismissal of applications in the Supreme Court of British Columbia to have the plaintiffs’ claims dismissed, stayed or struck.

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