The recent settlement of claims brought by Nigerian fishermen in the English courts against the oil company Shell serves as a reminder that multinationals can be subject to court proceedings in their home jurisdictions for acts committed by their operations overseas. This is the case in particular if the multinational is domiciled in the EU. In other jurisdictions, courts do not so readily accept jurisdiction over corporations being sued in their home country for actions that took place abroad. Hence, a possible strategy for a corporation seeking to avoid being sued at home may be to incorporate in or make the US its principal place of business.

Background

Shell Petroleum Development Company of Nigeria (SPDC), a Nigerian subsidiary of Shell announced in a media release on 7 January that up to £35 million will be provided as individual payments to claimants from the Bodo community in Nigeria that accept the settlement agreement as compensation for losses arising from two operations spills that occurred in 2008, with the remaining £20 million to be paid for ‘the benefit of the Bodo community generally’. According to expert evidence of the claimants, over 500,000 barrels of oil could have spilled into the local environment. A United Nations environmental assessment in 2011 found that full environmental restoration of Ogoniland from oil spills – not all attributable to Shell – will take 25-30 years to complete.

The underlying court proceedings in England and Wales

The claimants commenced court proceedings in the High Court in London in December 2011 seeking compensation under Nigerian statute and common law.

Although Shell admitted liability for the oil spills and that it should in principle be liable to compensate appropriate claimants for damage to their lands and livelihoods, there was disagreement over the duration of the spill and quantity of oil discharged from the pipelines. Prior to settlement, a trial on substantive issues was scheduled for the middle of 2015 and it had largely been agreed that the cases brought by ‘lead claimants’ would be heard for the court to give judgment on liability and quantum for the purpose of providing representative findings for the remaining claimants in negotiations with Shell.

Legal proceedings were initially brought against both the parent company Shell and a local Nigerian subsidiary. The parent company dropped out of the proceedings in return for the Nigerian subsidiary submitting to the jurisdiction of the High Court of England and Wales as part of a formal agreement with the claimants to hear and resolve the relevant disputes.

The High Court’s jurisdiction over Shell was presumably based on article 2(1) of the 2001 Brussels I Regulation (now replaced by article 4(1) of the Brussels I Regulation (recast) in force from 10 January 2015 which provides that the English courts have jurisdiction over any company that is domiciled within their territory. That is the case irrespective of where the underlying actions took place or which law is applicable to the substance of the matter. Under common law, this rule was still subject to a forum non conveniens test. However, in 2005, the European Court of Justice held in Owusu v Jackson [2005] ECR 1383, that EU states could not prevent cases proceeding against EU domiciled defendants on such grounds if the alternative venue was outside of the EU. In addition, the Civil Justice and Judgments Act 1982 (UK) provides that the jurisdiction of a court in England and Wales extends to proceedings for trespass or tort affecting immovable property outside of England and Wales unless the proceedings are principally concerned with a question of the title to, or right to possession of, that property.

Akpan v Shell – proceedings in the Dutch courts

The Dutch court in Akpan v Royal Dutch Shell plc (decision of 30 January 2013) came to a similar conclusion on the question of jurisdiction. In that case, Shell contested jurisdiction over the Nigerian subsidiary alleging that it was an abuse of process to hear the issue in the Dutch Court as it was clear that the action against the Dutch parent company, over which the court initially had jurisdiction, would fail. In support of their argument, the defendants argued that the Nigerian subsidiary could not foresee that it would be summoned in the Netherlands with regard to the oil spills in question.

The Dutch Court dismissed these arguments. It held that there was no basis for finding that the claims against the parent company would fail and that, accordingly, the defendants had not abused procedural law. The court held that the claims against the parent and subsidiary had the same legal basis, namely, the tort of negligence under Nigerian law. The court stated:

“for quite some time …, there has been an international trend to hold parent companies of multinationals liable in their own country for the harmful practices of foreign (sub-)subsidiaries, in which the foreign (sub-)subsidiary involved was also summoned together with the parent company on several occasions.”

The court held that it was foreseeable for the subsidiary that it might be summoned in the Netherlands together with the parent company in connection with the alleged liability for the oil spills.

In reaching these conclusions, the court also raised the issue of whether, if the claims against the parent company were dismissed, the court should leave the assessment of the claims against the subsidiary to a Nigerian court. The court concluded that the forum non conveniens restriction no longer played any role in today’s private international law under the Dutch code and held that:

“the jurisdiction of the Dutch court in the matter against SPDC … does not cease to exist in the event that the claims against RDS were to be dismissed, not even if subsequently, in fact, no connection or hardly any connection would remain with Dutch jurisdiction.”

The US position

The position with regard to corporations being sued in their home jurisdictions does not apply so readily in the United States. Unlike the EU, US courts have been very willing to dismiss cases on forum non conveniens grounds where the claimant is a foreign national with no residential or other ties to the US and is suing a US corporation, at least where the defendant can show that there is an alternative forum to hear the case abroad. (See Piper Aircraft Co v Reyno (1981) 454 US 235 where the US Supreme Court laid down the general principle that foreign plaintiffs are entitled to much less deference than local plaintiffs in terms of obtaining jurisdiction in a US court and In Re Union Carbide Corp Gas Plant Disaster (1986) 634 F Supp 842 and Aguinda v Texaco Inc (2001) 142 F Supp 2d 534 where US courts dismissed actions brought by foreign plaintiffs against US companies arising from environmental harm abroad.)

Further in the 2013 decision of Kiobel vs Royal Dutch Petroleum, the US Supreme Court held that the Alien Torts Act, which grants jurisdiction to federal district courts over “any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States” does not apply to claims where the plaintiff, the defendant, and the allegedly tortious conduct lack any connection to the US. This restricts the jurisdiction of US courts also in relation to non-US entities.

Implications

The settlement of legal proceedings in the courts of England and Wales in relation to actions brought by Nigerian claimants serves as a reminder that multinationals can be subject to court proceedings in their home jurisdictions for acts committed by their operations overseas – in particular if the entity is domiciled in the EU. Applicable rules of private international law strengthen the rights of local claimants to hold multinationals accountable for their actions in the efficient courts of their country of domicile.

The position is different in the US, where courts are more reluctant to allow proceedings to continue against local corporations for acts committed abroad. This distinction may be of consideration for corporations with relevant operations overseas in choosing their principal place of business or domicile subject to other considerations such as tax.