The Civil Liability of the Parent Company for the Acts or Omissions of Its Subsidiary: The Example of the Shell Cases in the UK and in the Netherlands

As capital is becoming ever more mobile, and multinational corporations ever more capable of dividing into a complex network of legal entities, their effective regulation is becoming increasingly difficult. By compartmentalising their operations, multinationals have been able to dramatically increase their profit margins but also minimize their exposure to legal requirements.

Civil litigation has a key role to play in the struggle for an enhanced accountability of multinational corporations. However, this role can only be played if the obstacle of the corporate veil can be overcome and the parent company can, in the appropriate circumstances, be found liable for the acts or omissions of its subsidiary. The proceedings brought by Nigerian citizens both in the Netherlands and in the UK against Shell (both the parent company and its Nigerian subsidiary) in relation to the environmental damage caused by oil spills in the Niger Delta are particularly interesting in this respect.

In the English case, Justice Fraser considered that there was no duty of care upon the parent company for the acts of omissions of its Nigerian subsidiary and, as a result, that the claims against both the parent company and the Nigerian subsidiary could not proceed in the English courts. By contrast, in the Dutch case, the claims were allowed to proceed in the Netherlands as the Court of Appeal of The Hague acknowledged that a parent company may, in certain circumstances, be liable for damages resulting from the acts or omissions of a subsidiary. Both of these cases will be analysed in turn.