Symposium: Civil Liability Claims for Business-Related Human Rights Abuses – Opening New Frontiers

[Ekaterina Aristova is a Post-Doctoral Fellow at the Bonavero Institute of Human Rights. Carlos Lopez is a Senior Legal Advisor at the International Commission of Jurists.]

Past decades saw an emerging trend towards reliance on civil liability claims to address business-related human rights abuses. A movement that had initial impetus from the United States of America has now expanded to other continents, especially to Europe. The Bonavero Institute of Human Rights (Faculty of Law, University of Oxford) and the International Commission of Jurists have invited a group of experts from academia and legal practice to participate in the online symposium to discuss the wider implications of recent civil liability developments in the law and policymaking of corporate responsibility to respect human rights and identify the remaining gaps in the law. The first part of the symposium featured two webinars on the scope of the parent company’s duty of care and access to justice barriers in civil litigation. The organisers are grateful to the speakers and the audience for the engaging and knowledgeable discussions and thorough analysis of the underlying issues surrounding the allocation of liability in complex business structures. As a next step, a series of blogs to be published during this week will continue the debate highlighting positive changes in the regulatory landscape and debating alternatives for the perceived gaps or weaknesses.

Pushing the boundaries of the parent company’s duty of care

On 29 January 2021, the Dutch Court of Appeal found Royal Dutch Shell (Shell) and its Nigerian subsidiary (SPDC) liable for the damage arising out of the oil spills from the pipelines operated by the corporate group. Two weeks later, the UK Supreme Court in Okpabi v Shell reaffirmed that English-domiciled parent companies, such as Shell, may owe a duty of care towards local communities impacted by their subsidiaries in third countries. The judgments add to earlier decisions in Lungowe v Vedanta Resources in the UK, and Hardie v White in New Zealand and have generated a considerable debate on the implications of the courts’ findings for the notion of duty of care within business relationships (see, for instance, case notes from Carlos Lopez and Ekaterina Aristova; Lucas Roorda; Robert McCorquodale; Cees Van Dam; Dalia Palombo).

These developments confirm that the scope of the parent company’s duty of care remains broad and goes beyond the formal notion of control over the subsidiary. The Okpabi judgment sends a clear message that human rights and environmental group-wide standards, policies and guidelines voluntarily adopted by parent companies and their public commitments may under appropriate circumstances constitute an assumption of responsibility by the parent company and give rise to liability. Further, the UK Supreme Court has reinforced its earlier statement that there is no specific category of parent company liability under the common law of torts but liability in these cases falls within the typical liability in triangular relationships, and it is very much a factual inquiry into the extent of the parent company’s involvement in the subsidiary’s activities that can take various forms.

Supply chain liability

The focus on the necessity of a case-by-case analysis opens the debate on the range of circumstances that may give rise to civil liability including the prospects for supply chain liability. The lead purchasing companies are not bound by the direct or indirect shareholding with their suppliers in the same way as parent companies are linked to the subsidiaries in the corporate groups. That said, they often exercise a certain level of managerial control over independent contractors by requiring suppliers to adhere to the purchaser’s internal procurement practices supported by training and social auditing. Such involvement with particular aspects of supplier’s activities bears similarities with the parent company’s implementation of the group-wide policies and leads potentially to the argument that a lead company could be also held liable in negligence for the breach of the duty of care.

It is yet to be seen if the courts find this argument convincing since the case law on supply chain liability remains rare. The Kik case in Germany and Das v. George Weston Limited in Canada are among unsuccessful examples dismissed on procedural grounds. Meanwhile, other legal mechanisms may prove to be more influential. In March 2021, the English Court of Appeal in Begum v Maran confirmed that a shipping company in London selling a vessel to South Asia could owe a duty of care to shipbreaking workers in Bangladesh. The court’s argument that “the ‘creation of danger’ is a recognised exception to the usual rule as to the intervention of third parties which may give rise to a duty of care” [para 64] may have ground-breaking consequences in different contexts. During the first webinar, Anil Yilmaz raised a far-reaching question of whether abusive supply chain practices such as low purchase prices, unfair penalties, unreasonable deadlines for complying with the purchasing orders could amount to the ‘creation of danger’ under the Begum test. Other legal avenues include unjust enrichment argued in an ongoing case commenced in the English courts by the farmers working on small tobacco farms in Malawi against British American Tobacco and consumer protection laws relied on the US to hold companies liable for alleged failures to disclose the use of unlawful child or slave labour in their supply chains.

Cases of corporate complicity

Corporate complicity is another area of application of the rules of parent company’s liability. The progressive judgments in Vedanta and Shell cases in the UK and the Netherlands concerned the damages arising from the subsidiaries’ operations in third countries. The application of similar rules as for parent company liability is uncertain when the harm is caused by the acts of third parties such as police, security providers or armed criminals. A different set of questions is raised when the companies are somehow involved in the commission of the abuse by the provision of goods and services, purchase of raw materials and products, hire of security services, financing of harmful behaviour. While in some jurisdictions ‘accessory’ or ‘secondary’ liability is classified under the heads of ‘joint’ liability, in others it is recognised as a separate legal doctrine (e.g., aiding and abetting in the US or common design in the UK). In Kalma v African Minerals, victims of the police attacks during unrest near one of the largest iron ore mine in Sierra Leone brought claims in the English courts against the English-based owner and operator of the mine on several common law grounds. In 2020, the English Court of Appeal dismissed the claims rejecting inter alia the submission that a duty of care had arisen in the relationship of African Minerals and the harmed villagers, because “the respondents’ employees were not involved in the unlawful acts and did not encourage or incite those unlawful acts” [para 146].

Again, it is yet to be seen if the evolving jurisprudence on the duty of care will have implications on the cases of corporate complicity.

Access to justice in civil claims

It is widely accepted that the efficacy and viability of civil liability claims depends to a great extent on the overall access to justice legal framework in a particular jurisdiction. In general, victims are facing multiple legal, jurisdictional, procedural and financial barriers to bringing a case. These hurdles have been well-documented by several international and civil society organisations. The UK example demonstrates that access to justice barriers evolve throughout the years and progressive developments go hand in hand with retrograde steps. The exit of the UK from the European Union ended the UK’s participation in the Brussels I regime and leads to the possible? return of the forum non conveniens doctrine in the rules of jurisdiction.  While NGOs and legal experts called on the EU to allow UK accession to Lugano Convention, the European Commission concluded that the UK membership should be refused viewing the Lugano Convention as an essential instrument in supporting the EU’s internal market. The forum non conveniens control is back, and the search for the most appropriate forum to litigate the dispute might impact victims of business-related human rights abuses in the post-Brexit environment.

But there are several judicial developments in key jurisdictions that show there is also some progress in enabling victims of violations access to courts when they have claim. In Canada, in Garcia v Tahoe Resources, the British Columbia Court of Appeal clarified that in a motion of forum non conveniens the party filing the motion bears the burden of showing another forum is clearly more appropriate. In its evaluation, the Court attached high importance to issues of procedural fairness, including the inexistence of “discovery” procedures in Guatemalan law and the short statute of limitations for civil claims (paras 55-56, 76). Although suits to intimidate complainants are numerous, discouraging them from recurring to the courts, there has always been some progress here. In a remarkable decision in MSR v Reddell concerning suits on defamation against environmental activists, the High Court of South Africa, held that “litigation that is not aimed at vindicating legitimate rights, but is part of a broad and purposeful strategy to intimidate, distract and silence public criticism, constitutes an improper use of the judicial process and is vexatious”. (para. 66)

Upcoming blogs

Over the next few days, many of these debates will be continued and further clarifications about the scope of the duty of care in parent company’s liability and the ways to increase access to justice will be offered. Radu Mares will trace the evolution of the duty of care doctrine from a novel argument to the broad interpretation accepted by the recent jurisprudence. Jindan-Karena Mann and Nicky Touw will assess how the responsibility in a triangular relationship can be expanded in cases of corporate complicity beyond the realm of parent-subsidiary-victim. Penelope Bergkamp further explore the state of the law in supply chain relationships and Paul Mougeolle will reflect on the evolving landscape of climate change civil litigation for business’ impacts of their operations. Finally, Dalia Palombo will question to what extent adjudication of the transnational tort cases by the Western courts could be framed as imperialistic exercises of jurisdiction and whether justice should be done locally in the host states.