Establishing Liability for Multinational Corporations: Lessons from Akpan

Lee J. McConnell - Northumbria University, UK.

Purpose: This article explores the central challenges which preclude the attribution of liability to

multinational corporations through a contextual analysis of the recent Akpan ruling of the District

Court of The Hague. It considers the lack of direct regulation for multinationals at the international

level, and explores the procedural/substantive hurdles which pervade in the domestic systems of

‘host’ and ‘home’ States, in an exposition the overall deficit in protection.

Design/methodology/approach: The article employs a case-based approach, utilising the judgement

of a recent Dutch case concerning environmental damage in Nigeria as a vehicle to discuss

parent/subsidiary liability.

Findings: The article demonstrates the procedural impediments that arise in the domestic forums of

developing countries, as well as the jurisdictional challenges presented by corporate structures which

preclude home State protection. Absent effective international regulation, this paper demonstrates that

continued emphasis on State responsibility, particularly in developing countries, is unworkable.

Originality/value: The article provides a fresh illustration of the challenges to the regulation of

multinational corporations in light of recent case law. It contributes to an evolving literature on the

wider topic of non-State actor regulation, which continues to generate significant academic debate.

Keywords: Multinational Corporations; Parent/Subsidiary; Environment; oil spill; Nigeria;

Jurisdiction; Human Rights; Non-State Actors

Paper type: Research Article

Introduction

The globalisation of the world economy has prompted the increasing impact of private actors

on human rights across the globe, yet parent corporations continue to evade direct liability for the

abusive operations of their foreign subsidiaries. The sprawling corporate structures boasted by many

multinational corporations (MNCs) span multiple jurisdictions, often incorporating holding

companies, wholly and partially-owned subsidiaries and external contractors. As such, complex

challenges concerning selection of an appropriate forum, the allocation of jurisdictional competence,

and the application of a particular State’s domestic law frequently arise. The situation is further

exacerbated by the variety of tangentially relevant laws, including human rights, tort, employment,

and company law.

This article seeks to provide a contextual analysis of the recent case of Akpan v. Royal Dutch

Shell & SPDC[1], one of three similar actions brought jointly by four Nigerian farmers and the Dutch

non-governmental organisation (NGO), Milieudefensie (Friends of the Earth). The applicants sought

remediation for environmental damage to their land resulting from oil spills occurring between 2004-

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2007. Utilising the Akpan proceedings as a vehicle for the examination of the larger challenges to the

establishment of parent/subsidiary liability, this article demonstrates that, absent judicially-

enforceable international obligations for MNCs, the onus often falls to domestic legal systems in

developing countries. Plagued by procedural difficulties which hinder the litigious success of

vulnerable victims, host States are tasked with the impossible duty of providing adequate avenues to

justice. The article also considers the paths to redress available in the home States of parent

corporations, and the inherent jurisdictional challenges that result from complex corporate

relationships. Ultimately, it will question whether the State-centric approach to corporate

accountability is able to constrain the abusive operations of MNCs, or whether it is unworkable given

the proliferation of increasingly powerful private entities.

Background to the Akpan Case

Though the actions brought by all four Nigerian plaintiffs possessed strong similarities, the

individual circumstances were distinct enough to ensure the success of only one party. Despite the

plaintiffs’ claims relating to events occurring solely in Nigeria, and directly pertaining only to the

Shell Petroleum Development Company of Nigeria (SPDC), the cases were heard in the Netherlands,

the home State of its parent company, Royal Dutch Shell (RDS). This article focuses primarily on the

successful applicant (Akpan), but will draw on documentation pertaining to all four plaintiffs in order

to better elaborate the Court’s reasoning, and to highlight the discrepancies that prompted the failure

of the other plaintiffs (Efanga & Oguru; Dooh[2]).

Akpan’s claims concerned spills originating from a well drilled by SPDC’s legal predecessor

in 1959. The well was abandoned later that year and sealed with a ‘Christmas tree’ valve, though it

could still be operated with a monkey wrench. In August 2007, a spill resulted in the estimated release

of 629 barrels of oil. The spills were reported to SPDC, and a Joint Investigation Team (JIT)

composed of SPDC employees and government representatives attempted to access the site one month

later. The local community initially denied access to the JIT, but permitted SPDC to stop the flow in

November 2007. The JIT report attributed the cause of the spill to tampering with the wellhead[3].

Two Nigerian contractors performed the clean-up operation on behalf of SPDC. Following the

commencement of proceedings, SPDC permanently secured the well utilising a concrete plug. The

plaintiffs sought to establish the joint and several liability of both defendants for existing and future

damage under the torts of negligence and nuisance, and arising from the violation of Akpan’s human

right to physical integrity.

The Limited Reach of International Law and the Challenge of State Responsibility in

Developing Countries

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Absent any judicially-enforceable international regulation of MNCs, the onus is placed on

individual States to provide domestic remedies. This position stems from the centrality accorded to

States by the dominant, positivist conception of international law. The classic reification provided by

the Permanent Court of International Justice in Lotus states that ‘the rules of law binding upon

States… emanate from their own free will as expressed in conventions or by usages generally

accepted as expressing principles of law and established in order to regulate the relations between

these co-existing independent communities’[4]. Although international legal personality has been

attributed to international organisations such as the United Nations[5], the doctrine has not expanded

to include wholly-private entities. Moreover, the confinement of international law-making to States,

expressed via their consent to treaties and customary practices, arguably produces a deficit in

procedural legitimacy, precluding the extension of obligations to entities that are unable to participate

in their formation (Ryngaert, 2010, pp.69-90). This discussion is beyond the scope of the present

article, but contextualises the frequent recourse to private law in human rights cases.

At face value, the deficit in international regulation is satiated domestically. Indeed, the UN

Secretary General’s Special Representative for Business and Human Rights confirmed in 2009 the

State ‘duty to protect’ as the first principle of his framework addressing MNC regulation[6]. But

while a State may well possess a duty to protect its citizens, it may lack the resources to do so, or may

be complicit in such violations. There exists an unwillingness or incapacity to implement these

obligations, rather than a complete absence of State obligations (De Schutter, 2005, p.240), though

this position ‘does lead to a certain degree of impunity… especially when the host State is seen as an

accomplice’ (De Brabandere, 2010, p.77). Thus, it has been suggested that ‘[n]on-state actors are

treated as if their actions could not violate human rights, or it is pretended that states can and do

control their activities’ (McCorquodale 2002, p.384). This article will next consider the procedural

and jurisdictional challenges experienced domestically within host and home States, before examining

their impact on the establishment of parent/subsidiary liability.

Procedural Challenges in Developing ‘Host’ Countries

An in-depth study of the procedural issues experienced in Nigerian litigation has suggested

that the technical nature of oil operations can preclude plaintiffs from proving violations of

environmental standards by MNCs (Frynas, 1999, p.124). The oil industry is likely to possess superior

technical knowledge in this regard. Negligence claims also favour certain circumstances. Instances

involving sabotage often absolve MNCs of liability (Frynas, 1999, pp.127-128), and it is argued that

false sabotage claims are frequently submitted specifically to avoid liability (Frynas, 1998, p.465).

Indeed, case law has demonstrated that court procedures may inadvertently favour oil companies. In

Shell v. Enoch[7], a Nigerian community sued for environmental damage. Shell filed a misjoinder,

arguing that each plaintiff’s grievance was distinct and did not merit a joint action. The Court

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concurred, but left the potential for individual actions. While communities may be able to pool legal

fees, it is unlikely that an individual will possess the resources to take on an MNC alone. Thus,

success is limited by the utilisation of ‘substantive and procedural rules as effective legal defences...

There were some indications that the principles of the common law worked in favour of oil

companies’ (Frynas, 1999, p.149). These factors explain the ‘forum-shopping’ allegations levied at

victims in host States. Similar challenges played out before the Court in Akpan, but Dutch procedural

law circumvented many common pitfalls, magnifying the failings of purely State-based approaches in

developing countries.

Regarding substantive law, Akpan initially petitioned for the application of Dutch law[8].In

the view of the Court, the defendants correctly appealed for the adoption of Nigerian law. Section 3(2)

of the Dutch Torts (Conflicts of Laws) Act 2001 provides that ‘the law of the State on whose territory

[the] effects occur will be applied, unless the perpetrator was reasonably unable to foresee the effects

in that place.’[9] The selection of Nigerian law led to the consideration of two further issues. First, the

defendants submitted that Milieudefensie’s claims were inadmissible because Nigerian law is absent a

class action provision. This was likely an attempt to separate the Nigerian plaintiffs from their

supportive NGO, and to force individual actions. Article 3:305a of the Dutch Civil Code (DCC)

permits associations to represent third parties and to submit collective claims based on similar

interests[10]. Citing the parliamentary record, the Dutch Court held that the Article applied as part of

Dutch procedural law, and highlighted its application in preceding cases[11]. Second, the defendants

submitted that Milieudefensie’s representation offered no advantage over individual litigation since

the NGO had ‘not engaged sufficiently in actual activities in respect of the Nigerian

environment’[12]. The Court found that the decontamination of soil and fishponds rose above

Akpan’s individual interests by benefitting the community and environment, and that litigating

individually could diminish Court efficiency[13]. Thus, the objective of global environmental

protection fell within the scope of Article 3:305a[14]. The utilisation of the Dutch forum prevented

the exploitation of Nigerian procedural law.

Given these inherent procedural challenges, and the inability or unwillingness of States to

regulate MNCs domestically, greater emphasis has been placed on the development of soft-law

initiatives such as the OECD Guidelines on Multinational Enterprises. Although these initiatives may

prove helpful in developing and interpreting international law, they are often met with cynicism due

to the absence of enforcement mechanisms (Davarnejad, 2010, pp.49-68). Nigerian communities

remain suspicious of oil companies due to past economic and environmental exploitation. Despite the

prominence of soft-law regulation among major multinationals, Corporate Social Responsibility

(CSR) strategies in Nigeria have failed to assuage such suspicion (Amao, 2008, p.90). Nigerian CSR

approaches are outdated, retaining a shareholder-centric model ‘[w]hile other African countries…

have followed an inclusive model of corporate governance that incorporates other stakeholder

issues...’ (Amao, 2008, p.99-100). Thus, entirely State-based approaches to MNC regulation present

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practical hurdles which militate against the success of vulnerable victims. Supplementary soft-law

initiatives have failed to provide judicially-enforceable regulation, leaving communities sceptical of

corporate interference.

Jurisdictional Challenges in ‘Home’ States

Akpan sought to initiate proceedings against both RDS, which is headquartered in the

Netherlands, and its wholly-owned Nigerian subsidiary, SPDC. Both operate as part of the Shell

Group, with SPDC acting as part of a joint venture with the State-owned Nigerian National Petroleum

Corporation (NNPC), among others. Such relationships are common in Nigeria, with private

subsidiaries typically maintaining managerial control, and State-owned companies contributing to

operational costs (Amao 2008, p.94). In Akpan, the clean-up operation was contracted out to two

Nigerian firms, further highlighting the corporate structures which may insulate defendants from

liability.

Section 54 of the Nigerian Companies and Allied Matters Act (CAMA) mandates

corporations registered abroad to reincorporate as Nigerian companies[15]. Though this may appear

an attempt by the government to assert domestic control over foreign corporations, its practical effect

has been downplayed. Pursuant to section 60 CAMA, the requirement does not affect the ‘rights or

liability of a foreign company to sue or be sued in its name or in the name of its agent,’[16] essentially

negating the suggested effect of section 54. Nigerian courts have consistently ruled to this effect[17],

and the provision has enabled parent companies ‘to deny liability for any adverse consequences’

(Amao, 2008, p.97). Such provisions often play a significant role in the assessment of proximity in the

parent-subsidiary relationships[18]. In defence of such strategies, some scholars have suggested that

legal separation is vital: ‘the multinational must take every precaution to structure its relationship with

the foreign subsidiary in such a way that... [the parent’s] assets are beyond the reach of any court’

(Mitnick,1989, p.400). Section 54 appears to aid this separation, to the detriment of victims.

The defendants in Akpan contested the Dutch Court’s jurisdiction over SPDC[19]. Article

7(1) of the Dutch Code of Civil Practice (DCCP) provides that a court possessing jurisdiction over

one defendant will hold concurrent jurisdiction over another, provided the causes of action are

connected [20]. The defendants argued that the external nature of the case demanded ‘a more stringent

connection’[21]. Both SPDC’s Nigerian incorporation and joint venture activities substantiated the

distinction between parent and subsidiary. The defendants also alleged that the claims against RDS

had been initiated solely to establish Dutch jurisdiction over SPDC[22]. This argument is particularly

interesting in the light of the judgement addressing RDS in the main action. In response, the Dutch

Court restated its jurisdiction over RDS, citing Article 2(1)[23] and Article 60(1)[24] of the Brussels

Regulation. Since SPDC is not domiciled in the E.U., the Dutch Court turned to the interpretation of

Article 7(1) DCCP, finding the nexus between the claims against both defendants sufficiently justified

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a joint hearing. Furthermore, the stringency of the court efficiency criterion in external cases was not

decisive[25]. Finally, the Court suggested that abuse of process may only rarely be assumed,

particularly when plaintiffs knowingly base claims on incorrect facts or arguments that have no

chance of success. The Court, cognisant of the exceptional circumstances under which the corporate

veil may be pierced, felt the action was justified[26].

The Dutch Court also briefly contemplated jurisdiction in the main action. The defendants

submitted that the plaintiffs’ failure to obtain documents held by Shell rendered their claims against

RDS certain to fail. Citing Chandler v. Cape[27], the Court dismissed this claim, finding that

Nigerian law permitted parent company liability for damage resulting from their subsidiaries[28].

Next, the defendants argued that the Painer[29] ruling of the European Court of Justice (ECJ), which

considered the application of Article 6(1) of the Brussels Regulation[30], could be applied

analogously to Article 7(1) DCCP. The ECJ found that the initiation of distinct claims against

multiple defendants in the same action did not preclude application of Article 6(1), provided that the

defendants could foresee that they might be sued in a Member State where one of them was

domiciled. It was submitted that SPDC could not foresee legal action in the Netherlands concerning

its Nigerian operations. The Dutch Court also dismissed this claim, citing the similar legal basis of the

plaintiff’s claims, and the ‘international trend to hold parent companies of multinationals liable in

their own country for the harmful practices of foreign subsidiaries.’[31] This is perhaps surprising

given the corporate structure highlighted above.

Interestingly, the Dutch Court went one step further, stating that its jurisdiction over SPDC

would not cease, ‘even if subsequently… hardly any connection [remained] with Dutch

jurisdiction.’[32] The Court concluded that ‘the forum non conveniens restriction no longer plays any

role in today’s international private law’[33]. This common law doctrine permits courts ‘the discretion

to decline to exercise jurisdiction because the interests of justice are best served if the trial takes place

in another court.’ (Brand & Jablonski, 2007, p.1) There is no uniform approach to the doctrine’s

application. The U.K. test permits its application only where another competent forum is available, ‘in

which the case may be tried more suitably for the interests of all the parties and the ends of

justice.’[34] Conversely, the U.S. has proven amenable to balancing public and private interests

(Rose, 1986; Smith, 2010). Gulf Oil v. Glibert[35] provided that the interest ‘likely to be most

pressed, is the private interest of the litigant... Factors of public interest also have place in applying

the doctrine. Administrative difficulties follow for courts when litigation is piled up… instead of

being handled at its origin.’[36] Particularly concerning is the Piper Aircraft judgment, where the

Court assigned less weight to the preferences of foreign plaintiffs[37]. This position was later justified

in Wiwa[38], not out of bias towards U.S. citizens, but because a foreign plaintiff is more likely to be

‘inconvenienced by a requirement to bring a claim in a foreign jurisdiction.’[39] But surely equal

deference should be given to the home State of the multinational since ‘it is also less inconvenient for

a defendant to defend a suit in its home State’ (Smith, 2010, p.177).

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In proceedings similar to Akpan, forum non conveniens arguments can prove problematic.

Although a stronger jurisdictional link arguably exists between the parties and a forum in the State in

which the damage occurred, host States are often volatile, lack human rights/fair trial assurances, as

well as the infrastructure to enforce judgements. Developing countries often ‘do not have the

sophisticated tort law system present in the [U.S.]. Potential liability is often capped… [and]

competition between governments for the business of MNCs can result in a “race to the bottom”...’

(Duval-Major, 1992, p.675). Thus, while usually the simplest avenue to redress, host State litigation is

usually overlooked ‘because of inadequate protection in local municipal law, inability to access the

forum, [and] poor prospects of recovering compensation’ (McBeth, 2011, p.294). The Court’s

rejection of forum non conveniens arguments in Akpan may stem from the Dutch civil legal system

(lis pendens arguments, as codified by Article 23 of the Brussels Regulation are often brought instead.

Such an argument was dismissed in Akpan), or may reflect a nascent recognition of the codification of

the doctrine in the Hague Convention on Choice of Court Agreements 2005 (Brand & Jablonski,

2007, pp.183-210).

Procedural Challenges in ‘Home’ States

Procedural challenges also arise in home States. In Akpan, the application of Nigerian law

significantly impacted the substantive claims. Section 11(5)(c) of Nigeria’s Oil Pipelines Act (OPA)

1956 requires license-holders to compensate injured parties for damage resulting from oil spills,

unless it occurred on ‘account of his own default or… the malicious act of a third person’.[40] Thus, a

burden was placed on Akpan to substantiate his claims that the spill resulted from poor maintenance.

Under the ‘Environmental Guidelines and Standards for the Petroleum Industry in Nigeria’

(EGASPIN), operators incur responsibility for the containment and recovery of any spill discovered in

their area, ‘whether or not its source is known’[41]. Thus, operators remain responsible for containing

and remedying spills, regardless of their cause. Accordingly, all four Nigerian plaintiffs petitioned for

the disclosure of company documents[42]. Shell, citing the sabotage evidenced by the JIT report,

contested this motion. The defendants also produced video evidence demonstrating the ease with

which the wellhead was closed with a wrench[43]. The Court found that the plaintiffs’ explanations

for the cause of the leak were unsubstantiated, and confirmed sabotage as the cause of the spill[44].

This decision severly impacted the final ruling.

Beyond Jurisdiction and Procedure – Parent and Subsidiary Liability in Akpan

Having contextualised the procedural and jurisdictional challenges which undermine State-

centric approaches to MNC regulation, discussion will now turn to the attribution of liability to

parents and subsidiaries under substantive law. Although actions occasionally proceed beyond their

interlocutory stages, corporate structures and ancillary judgements often preclude the attribution of

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liability to parents. Since claims are often framed in tort law, a brief note on the operation of these

private law rules is necessary. The law governing non-contractual obligations for compensation in

Nigeria is based on English common law, and English judgements occurring after the State’s

independence remain persuasive. The torts of negligence and nuisance have been partially codified by

the aforementioned OPA. The tort of negligence was established by Donoghue v. Stephenson[45],

which provided that negligence constituted damage resulting from the breach of a duty of care. The

Caparo Industries v. Dickman[46] ruling stated that a duty will arise where the parties are sufficiently

proximate, the damage suffered was foreseeable, and it is fair, just and reasonable to assume the

existence of a duty.

While the assessment of SPDC’s actions was relatively straightforward, the situation

concerning its parent was quite different. No general duty of care to prevent injury resulting from

third-party conduct exists in common law. Such a duty can be established exceptionally, where: i) a

special relationship results in the assumption of a duty of care by the defendant; ii) a special

relationship results from the defendant’s supervision/control; iii) the defendant creates a dangerous

situation that may be exploited by a third party; iv) the defendant knows that a third party has created

a dangerous situation while under its influence[47]. Against these criteria, the Dutch Court turned to

assess the liability of RDS.

Parent Company Liability - the Challenge of Corporate Structures

Although Akpan’s case proceeded unhindered beyond all ancillary challenges, the attribution

of liability to parent corporations for the activities of foreign subsidiaries usually suffers an

insurmountable hurdle. In Akpan, it was submitted that RDS was aware of frequent oil spills in

Nigeria and ‘exercised influence on SPDC’s activities in the region’[48]. The prevention of

environmental damage resulting from its subsidiaries is a policy objective, and it was therefore argued

that RDS had assumed a duty of care over SPDC’s operations[49]. The recent Cape[50] case

addressed a similar issue: whether the formulation of a health and safety policy by a parent generated

a duty of care for an employee of its subsidiary. In Cape, the plaintiff had been exposed to asbestos

throughout his employment. The English Court of Appeal held that the law may impose a duty on a

parent for the health and safety of its subsidiary’s employees provided: i) the business of the

parent/subsidiary were essentially the same; ii) the parent company had more knowledge of health and

safety in the industry than the subsidiary; iii) the parent knew of unsatisfactory working conditions at

its subsidiary; iv) the parent knew that its subsidiary or employees would rely on the parent company

for protection[51].

In Akpan, the Dutch Court found that the ‘proximity between parent company and the

employees of its subsidiary that operates in the same country cannot be unreservedly equated with the

proximity between the parent of an international group of oil companies and the [population] in the

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vicinity... of its [foreign] subsidiaries’[52]. The subsidiary-employee relationship in Cape produced a

duty of care for a limited group, whereas a duty of care for a parent company of an international oil

group for the population proximate to its pipelines would create ‘a virtually unlimited group’[53]. The

infliction of harm in Cape was direct, whereas in Akpan, at best SPDC had failed ‘to prevent third

parties from indirectly inflicting damage on people living in the vicinity’[54]. Thus, at best RDS had

failed to induce/enable SPDC to prevent and limit any damage[55]. Once again, a corporate structure

insulated the parent company from liability.

The only circumstance outlined in Cape applicable to Akpan concerned the parent’s

knowledge of the risks its subsidiary’s operations posed to third parties. In qualification, the Court

found that the businesses were distinct ‘because RDS formulates general policy lines… [and]

worldwide strategy… whereas SPDC is involved in the production of oil in Nigeria.’[56] It could not

be assumed that RDS possessed more knowledge of oil production in Nigeria, or the protection of the

local community. Cape did not serve as a precedent. Given the lengths of the Dutch Court to justify

its jurisdiction over SPDC, it is surprising that the claims against RDS were resolutely dismissed so

early in the proceedings. The finding is also interesting in the light of the prophetic suggestion that it

may be possible to litigate against Dutch multinationals on a similar private law basis to English cases

‘by constructing the whole case as one involving a lack of supervision by the head office of [an MNC]

over its subsidiary abroad’ (Betlem, 2000, p.286).

The difficulty posed by corporate structures is well demonstrated by the Barcelona

Traction[57] decision. Here, Belgium sought to initiate proceedings against Spain for damage

resulting from the Spanish government’s restrictive foreign business policies. Barcelona Traction was

incorporated in Canada, and controlled subsidiaries in Spain. The company was controlled by a

Belgian parent called Sidro, which was itself controlled by Sofina, the majority shareholders of which

were Belgian. To succeed, the Court needed to expose the effective control of the company by its

Belgian parent, despite its Canadian incorporation (McBeth, 2011, p.277). The International Court of

Justice (ICJ) was unwilling, finding Canada to be the proper State to exercise protection[58]. The case

demonstrates a recurring hurdle to MNC accountability. An entity may be ‘insulated by separate

incorporation of its constituent entities’ encapsulating the balance between effective corporate

regulation 'and the desire to ensure the effectiveness of company law and the associated economic

benefits’ (McBeth, 2011, p.275).

Despite numerous actions against parent corporations in home states, Cape alone has

produced a definitive judgement. Other attempts have been dismissed on technicalities or achieved

settlements [59]. The principal solicitor in three such cases has argued that, provided there is

sufficient ‘control and knowledge of the subsidiary operations by the parent there seems to be no

reason in principle why the general principles of negligence should not apply’ (Meeran, 1999, p.170).

Unfortunately, the dismissal or settlement of such cases means that decisions against parent

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companies are rarely rendered. Save for Cape, these cases do not provide a formal precedent, and

merely demonstrate that they are able to progress beyond interlocutory stages (McBeth, 2011, p.296).

Additionally, the U.S Alien Torts Claims Act (ATCA) permits non-US citizens to bring

private law claims to Federal District Courts for acts ‘committed in violation of the law of nations or a

treaty of the United States.’[60] ATCA has enabled allegations of human rights violations by MNCs

to play out in domestic courts, and permits incidents occurring overseas to be heard provided there is

a nexus between the defendant and U.S. In Unocal[61], it was submitted that an oil company had

assisted the Myanmar government in committing human rights violations. The Myanmar military,

acting as security for Unocal, had allegedly ‘used forced labour from local villages to provide

construction for the pipeline... [and] committed acts of murder, torture and rape’ (Kaleck & Saage-

Maaβ, 2010, p.704). Unocal and the aforementioned Wiwa case were both settled out of court

following protracted litigation which indicated a judgment favouring the plaintiffs.

A recent U.S. Supreme Court decision has the potential to limit the application of ATCA.

Kiobel[62] confirmed a presumption against the extraterritorial application of the statute, finding that

‘it would reach too far to say that mere corporate presence suffices.’[63] Echoing Morrison[64], the

Court found that ‘even where the claims touch and concern the territory of the [U.S.], they must do so

with sufficient force to displace the presumption’[65]. Yet, it is recognised that, although undesirable,

any limitations on ATCA would not completely hamper the trend towards foreign direct liability

cases, since the potential to initiate such claims in other Western countries remains. Although such

litigation ‘may not engender the same level of moral condemnation that [ATCA]-based claims

pertaining to corporate violations do, it allows for claims in relation to a broad range of… norm

violations resulting from multinational corporations’ transitional activities’ (Enneking, 2012, p.400).

Thus, whereas novel statutory approaches linking human rights and private law remedies may be

eroding, regular State-based regimes should still provide an avenue to redress.

The Liability of Subsidiaries – Practical Challenges

Private law claims initiated against subsidiaries are often more straight-forward due to their

proximity to the alleged damage. Since the damage occurred on the territory where both parties are

domiciled, liability is a question of fact, unimpeded by the structures of legally-distinct private

entities. However, procedural challenges such as those relating to the disclosure of evidence can

render plaintiffs unable to substantiate a causal link between defendant and damage. This in turn can

negate the majority of claims brought under both private law and human rights law.

In Akpan, the Court began by finding that Milieudefensie’s ability to protect third parties via

Section 3:305a DCC did not lead to the conclusion that it had suffered damage directly[66]. Next, the

Court considered the liability of SPDC for damage to Akpan under Section 11(5)(c) OPA, which

codifies the rule in Rylands v. Fletcher[67]. The earlier attribution of the spill to sabotage meant that

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SPDC could not be held liable for the damage caused by the occurrence of the spills[68]. It is arguable

that the plaintiffs’ inability to obtain documentation relating the maintenance of the well impeded the

establishment of a causal link between the subsidiary and spill. Such circumstances are concerning

given the ‘incentive to blame oil pollution on political instability such as sabotage because there is no

comprehensive legislation on compensation payments to communities in Nigeria’ (Frynas, 1998,

p.465). This controversy is also recognised by the Director General of the Federal Environmental

Agency who has suggested a large number of Nigerian oil spills result from outdated pipelines

(Eweje, 2006, p.44). Despite its sabotage ruling, the Court in Akpan permitted an action concerning

SPDC’s response to the spill[69], though nuisance claims were precluded[70]. The Dutch Court was

unable to see how the failure of SPDC to respond to the spills in good time had contributed to any

additional damage given the local community’s denial of access to SPDC[71]. Similarly, claims that

SPDC had been negligent in its clean-up operation were dismissed[72].

Akpan’s only successful claim concerned SPDC’s failure to prevent the sabotage. Here,

Akpan’s proceedings diverge from the other Nigerian plaintiffs. Akpan argued that the sabotage was

foreseeable, that a strong proximity existed between SPDC and the community, and that it was fair,

just and reasonable to impose a general duty of care to prevent sabotage[73]. Although no Nigerian

precedent existed, the potential for the violation of such a duty remained[74]. In sabotage cases,

Nigerian courts had ‘consistently ruled the operator was not liable… [demonstrating that] under

Nigerian law, operators have no general duty of care in respect of the people living in the vicinity of

their oil pipelines’[75]. However, such a finding had not been ruled-out[76]. Indeed, the court in

SPDC v. Otoko[77] provided that operators may be liable for their failure to prevent sabotage where

the resulting damage is foreseeable. The Court in Akpan felt it was foreseeable that any spill from

SPDC’s facilities would produce harmful consequences for local population. Since the aboveground

valves had been left unprotected since 1959/60, SPDC should have foreseen the risk and taken low-

cost measures to reduce the risk of sabotage by sealing the well with a concrete plug, as occurred

following the commencement of proceedings[78]. Conversely, in Dooh and Efanga & Oguru, SPDC

had taken all action necessary to secure the pipelines by submerging them underground and providing

frequent security patrols[79].

A final dimension to the Akpan case concerns the claim that SPDC had violated Akpan’s

human rights to physical integrity by contaminating his living environment. Contrary to the decision

in Gbemre v. SPDC & Others [80], the Dutch Court found that the defendant could not be blamed for

any active conduct but negligence. Although reprehensible, the Court felt that, in ‘horizontal

relationships… this cannot be designated as an infringement of a human right.’[81] In Gbemre, it was

argued that the pollution resulting from gas flaring (see Umukoror, 2009, pp.54-57) violated the

plaintiff’s fundamental rights to life, dignity and a healthy environment under both the Constitution of

the Federal Republic of Nigeria 1999 and the African Charter on Human and Peoples Rights. The

plaintiff submitted that the laws governing gas flaring were unconstitutional under section 1(3) of the

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Constitution. The incorporation of environmental rights into State constitutions is increasing across

the developing world, but also apparent in the U.S. (Ebeku, 2007, pp.312-320). A previous ruling had

provided that the rights contained in Chapter 2 of the Nigerian Constitution were potentially

enforceable against private actors[82]. The Court in Gbemre held that SPDC’s operations constituted

a gross violation of the community’s human rights, and that the existing legislation was inconsistent

with both the Nigerian Constitution and the African Charter.

Similarly, human rights approaches may circumvent procedural challenges by enabling courts

to grant injunctions to safeguard fundamental rights under the fast track procedure provided by

section 46 of the Nigerian Constitution[83]. The unwillingness of the Court in Akpan to utilise this

human rights route is arguably justified on the grounds the defendants were unable, potentially as a

result of the Court’s disclosure ruling, to substantiate a causal relationship between SPDC and the

spills. However, one of the key elements of the Gbemre decision was that the judge ‘ignored the

respondent’s contention that the... activities [had] no causal connection with any of the reported cases’

(Ebeku, 2007, p.318). In spite of the Akpan decision, it has been suggested that the shift toward

human rights litigation in Nigeria may contribute to overcoming the accountability deficit for MNCs

(Amao, 2008, p.110-111). It may well be that the spills in Akpan would have been attributed to

sabotage regardless of the disclosure ruling. As it stands, the case further emphasises the impact of

procedural rulings on the success of substantive claims.

Conclusion

The establishment of parent/subsidiary liability presents a myriad of legal issues demonstrable

at the international and domestic level. The recently concluded Akpan case, which this article closely

follows, provides a fresh illustration of the challenges which preclude the effective regulation of these

entities. Absent direct regulation at the international level, save for soft-law provisions which are

often industry-made and lack the coercive bite of judicial enforcement, responsibility has fallen to

host States to provide domestic redress. Given the recent emphasis placed on the ‘responsibility to

protect’ doctrine by John Ruggie, it is unlikely that we will move beyond the State-centric model any

time soon. In the Nigerian context particularly, the flaws in the CSR regime are readily evident, with

local communities remaining sceptical of corporate interference.

Akpan, and the supplementary literature upon which this article has drawn, has demonstrated

that litigation in the domestic forums of both host and home States is fraught with procedural hurdles

which prohibit expedience and devastate substantive claims. It has highlighted the inability and

unwillingness of host States to enforce their international obligations in the light of the proliferation

of powerful private actors upon which they are economically dependent. The export of the Akpan

proceedings to the Netherlands demonstrated the major jurisdictional challenges which preclude legal

action in the home States of parent corporations concerning the activities of their foreign subsidiaries.

12

The novel approach of the Dutch Court in dismissing forum non conveniens restrictions suggests that

procedural rules in home States may provide a more balanced hearing for both victim and perpetrator.

Similarly, the tactics employed by MNCs to break up joint actions, removing NGO support,

dissolving the financial unity of affected communities, and exposing individual litigants to navigate

procedural complexities alone, appear less potent in Western jurisdictions.

Beyond procedural issues, case law imposing duties of care on parents for the activities of

their subsidiaries is sparse. Developments appear to have been made under tort regimes in some

Western States, whereas the unique avenues to redress provided in the U.S. by the ATCA appear to be

the subject of drastic erosion. Yet, at the same time, novel approaches to human rights claims in the

domestic jurisdictions of developing countries may offer some promise by providing expedient

judgements. The question remains as to whether the State-centric approach to international law will

ever effectively constrain the abusive multinational corporations, or whether instead the international

legal system should seek to expand its reach to impose directly binding obligations onto private non-

State entities.

Notes

1. Akpan v. Royal Dutch Shell & SPDC, District Court of the Hague, LJN:BY9854,

C/09/337050/HAZA 09-1580

<http://www.milieudefensie.nl/publicaties/bezwaren-uitspraken/final-judgment-akpan-vs-shell-

oil-spill-ikot-ada-udo> accessed 20/09/13

2. Dooh v. Royal Dutch Shell & SPDC, District Court of the Hague, LJN:BY9854,

C/09/337058/HAZA 09-1581 <

http://www.milieudefensie.nl/publicaties/bezwaren-uitspraken/final-judgment-dooh-vs-shell-oil-

spill-goi> accessed 20/09/13; Efanga & Oguru v. Royal Dutch Shell & SPDC, District Court of

the Hague, LJN:BY9850, C/09/330891/HAZA 09-0579 <

http://www.milieudefensie.nl/publicaties/bezwaren-uitspraken/final-judgment-oguru-vs-shell-

oil-spill-goi> accessed 20/09/13

3. ibid. supra note 1 para. 2.7

4. The Case of the S.S. "Lotus", PCIJ Publications, Series A. No.10, 1927, p.18

5. Reparation for Injuries, ICJ Reports (1949), 179

6. Human Rights Council, Report of the Special Representative of the Secretary General on the

Issue of Human Rights and Transnational Corporations and Other Business Enterprises, UN

Doc A/HRC/11/13 (22 April 2009) para. 12

7. Shell v. Enoch (1992) 8 NWLR 335

8. Original Subpoena 2008 (Efanga & Oguru), Nos.4GD4306 & GT0210, para. 19

<http://milieudefensie.nl/publicaties/bezwaren-uitspraken/subpoena-oruma/> accessed 20/09/13

13

9. Torts (Conflict of Laws) Act (Wet Conflictenrecht Onrechtmatige Daad) 2001, s3(2)

10. Dutch Civil Code, Book 3: Property Law in General, Article 3:305a

11. Judgement of 14 September 2011, Production of Exhibits in the Main Action,

337060/HA/ZA09-1580 para. 4.3 <http://www.milieudefensie.nl/publicaties/bezwaren-

uitspraken/judgment-exhibition-alfred-akpan> accessed 20/09/13

12. ibid. para. 4.4

13. ibid.

14. ibid.

15. ‘[E]very foreign company which before or after the commencement of this Decree was

incorporated outside Nigeria… shall take all steps necessary to obtain incorporation as a

separate entity in Nigeria’. Companies and Allied Matters Act 1990, s54(1)

16. Companies and Allied Matters Act 1990, s60(b)

17. See Watanmal (Singapore) v. Liz Olofin & Co (1998)1 NWLR (PT 533) 311, 319.

18. See Mobil Producing (Nig) United v. Monokpo (2003) 18 NWLR (Pt.852) 346; SPDC v. Dr

Pere Ajuwa and Honourable Ingo Mac-Etteli, CA/A/209/06

19. Motion for the Court to Decline Jurisdiction/Conditional Statement of Defence (Efanga &

Oguru), Docket No. 2009/0579 at para.80 <http://milieudefensie.nl/publicaties/bezwaren-

uitspraken/shells-response-to-the-subpoenas> accessed 20/09/13

20. Dutch Code of Civil Procedure, Book 1, Article 7(1)

21. ibid. supra note 19, para. 75

22. ibid. para. 80

23. ‘[P]ersons domiciled in a Member State shall, whatever their nationality, be sued in the courts of

that Member State.’ Council Regulation (EC) no.44/2001, Official Journal of the European

Communities L12/1, Article 2(1)

24. ‘[A] company… is domiciled at the place where it has its: (a) statutory seat, or (b) central

administration, or (c) principal place of business.’ ibid., Article 60(1)

25. Judgement in Motion Contesting Jurisdiction, 30/12/09, 330891/HA ZA09-579, para. 3.7

<http://milieudefensie.nl/publicaties/bezwaren-uitspraken/judgment-courtcase-shell-in-

jurisdiction-motion-oruma> accessed 20/09/13

26. ibid. paras. 3.3-3.4

27. Chandler v. Cape [2012] EWCA Civ 525 (hereinafter Cape)

28. ibid. Akpan supra note 1 para.4.3

29. Eva-Maria Painer v. Standard VerlagsGmbH, ECJ-C-145/10

30. ibid. supra note 23, Article 6(1)

31. ibid. supra note 1 para. 4.5

32. ibid. para. 4.6

33. ibid.

14

34. Spiliada Maritime v. Cansulex Ltd. [1987] A.C. para. 476

35. Gulf Oil v. Gilbert, 330 U.S. 501 (1947)

36. ibid. para. 508

37. Piper Aircraft v. Reyno, 454 U.S. 235, 242 (1981)

38. Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88 (2d Cir. 2000).

39. ibid. para. 102

40. Oil Pipelines Act (Nigeria) 1956, s11(5)(c)

41. Department of Petroleum, Environmental Guidelines and Standards for the Petroleum Industry

in Nigeria (2002) 4.1 (Mystery Spills of Unknown Origin)

42. ‘The party with a legitimate interest may… claim access... [to] specific documents concerning

legal relationship between the requesting party... and the person in whose control or custody the

evidence lies.’ Dutch Code of Civil Procedure, Article 843a.

43. ibid. supra note 1 paras. 4.7-4.8

44. ibid.

45. Donoghue v. Stephenson [1932] UKHL 100

46. Caparo Industries v. Dickman [1990] UKHL 2

47. Smith v. Littlewoods [1987] UKHL 18

48. ibid supra note 1 para. 4.27

49. ibid.

50. ibid. supra note 27

51. ibid. para. 80

52. ibid. supra note 1 para. 4.29

53. ibid.

54. ibid. para. 4.30

55. ibid.

56. ibid. para. 4.31

57. Barcelona Traction, Light and Power Company (Belgium v. Spain) (Second Phase) [1970] ICJ

Rep 3

58. ibid. para. 101

59. Connelly v. RTZ [1998] AC 854; Lubbe v. Cape [2000] 4 All ER 268; Sithole v. Thor Chemical

Holdings [1999] EWCA Civ 706

60. Alien Tort Claims Act 28 U.S.C., S1350 (ATCA)

61. Doe v. Unocal, 395 F.3d 932 (9th Cir. 2002)

62. Kiobel v. Royal Dutch Petroleum (Slip Opinion) 569 U.S. (2013)

63. ibid. p. 14

64. Morrison v. National Australia Bank, 561 U.S. (2010)

65. ibid. supra note 62 (Kennedy, J., concurring), p. 1

15

66. ibid. supra note 1 para. 4.35

67. Rylands v. Fletcher [1868] UKHL 1

68. ibid supra note 1 para. 4.36

69. ibid.

70. ibid. para.4.37

71. ibid para.4.47

72. ibid. paras.4.49-4.54

73. ibid. para.4.39

74. ibid. para.4.40

75. ibid.

76. ibid. para.4.41

77. SPDC v. Otoko [1996] 6 NWLR (Pt. 159) 693

78. ibid. supra note 1 para. 4.44

79. ibid. supra note 2, Dooh para.4.49; Efanga & Oguru para.4.51

80. Gbemre v. SPDC, FHC/B/CS/53/05

81. ibid. supra note 1 para.4.56

82. Attorney General of Ondo State v. Attorney General of the Federation & 35 Others [2002] 5 SC

(pt.1) 1

83. Constitution of the Federal Republic of Nigeria 1999, s46

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