An elusive justice—holding parent companies accountable for human rights abuse

Recently, the UK High Court threw out a case brought against oil giant Shell by two impoverished communities in the Niger Delta. It is a blow to the communities in their struggle for justice after suffering years of devastating oil spills.

But the judgement also has wider implications for corporate accountability, making it more difficult to bring future legal cases against UK companies that abuse human rights abroad. As such, the ruling goes to the heart of a situation in which multinational corporations enjoy an impunity that is sharply at odds with their enormous profits and power. It further demonstrates the need for legal reforms that actually improve access of victims of corporate abuse to courts in jurisdictions where large corporations are based (the ‘home’ state).

The reality is that people continue to suffer abuses at the hands of companies operating across borders but rarely receive any meaningful remedy.

The reality is that people continue to suffer abuses at the hands of companies operating across borders—particularly in the developing world—but rarely receive any meaningful remedy. Picture the Nigerian woman who wakes up one morning to find that the riverbank where she used to collect shellfish has been covered in sticky black oil. Oil that is never properly cleaned up, and continues to leech into the water and soil for years, sometimes decades, destroying her livelihood and source of food, and putting her health at risk.

This is a familiar experience in the Niger Delta, where hundreds of oil spills take place every year. Decades of massive environmental destruction and its profound impacts on the rights of people living there have been well documented. Shell is the largest operator on land, and has been in the region since it first discovered oil there in 1956. In 2011, the United Nations Environment Programme found that Shell’s procedure for cleaning up oil spills “does not achieve environmental standards according with Nigerian legislation, or indeed with [Shell Nigeria’s] own standards”. The flawed clean-up procedure was endorsed by, and based on guidance from, Shell’s headquarters.

The UK court ruled that Shell’s parent company cannot be held responsible for its 100%-owned Nigerian subsidiary’s role in oil pollution and human rights abuses. The disappointing decision is based on a strict interpretation of corporate law whereby a parent company is considered to be legally separate from its subsidiary. But this is an artificial distinction when it comes to responsibility for human rights abuses, including across borders. Shell argues that the case concerned Nigerian plaintiffs and a Nigerian company. But our experience working on the issue has shown that Shell’s parent company is deeply involved in Nigeria, and all our interactions have been led by Shell staff in London and The Hague.

Flickr/Sosialistisk Ungdom (Some rights reserved)

Local residents survey the aftermath of an oil spill in the Niger River Delta.

Shell’s efforts to distance itself from its Nigerian subsidiary follows an established strategy by corporate actors defending allegations of abuse brought in their home state courts. The result is that all too frequently, such cases are thrown out on the basis of preliminary procedural issues before the merits of the case are ever even heard. US courts dismissed claims against Union Carbide Corporation (UCC) over the 1984 Bhopal industrial disaster—in which more than 22,000 people died—after UCC argued that its Indian subsidiary was responsible. This is despite internal documents showing UCC itself was responsible for the design, and technical and operational control of the Bhopal factory, and had been aware of safety problems.

Victims often pursue cases in the company’s home state because legal action is either very difficult or simply not possible in their own state. It is long overdue for policymakers to challenge the ways in which the current framework of corporate law can be used to undermine human rights and victims’ right to access a legal remedy in home states. There is now a significant body of work by academics, the UN and others to identify ways to make parent companies legally responsible for human rights abuses by their foreign subsidiaries. Amnesty International has put forward proposals for specific legal reforms—for example, reversing the burden of proof in certain situations of wide-spread harm or systemic human rights abuse, like the Niger Delta—so that the parent company must prove it is not legally responsible.

Unfortunately, there seems little appetite from governments in really closing these “governance gaps” created by globalisation that Professor John Ruggie identified as the “root cause of the business and human rights predicament”. Government ‘National Action Plans’ on business and human rights have been timid in ambition, failing to address these systemic issues, focusing instead on out-sourcing the problem to corporate-level grievance mechanisms.

Governments are also unwilling to confront the elephant in the room: the hugely unequal balance of power between global corporations and the people, often poor, whose lives are affected by their activities. Individuals and communities on the receiving end of corporate abuses face an uphill struggle to get their case before a home state court, with only a handful of lawyers around the world able and willing to bring such cases, only to then face procedural difficulties and delays. They are up against powerful companies that—for all their lip service to human rights—fight tooth and nail to avoid liability for abuses, and have deep pockets to do so.

But there have been some positive signals. On the same day as the UK court ruling, a Canadian court ruled that a lawsuit against Tahoe Resources for the violent repression of a peaceful protest in Guatemala in 2013 may advance in Canada. In 2015, a court in the Netherlands took the opposite approach to the UK court, deciding that a case by another oil-affected Nigerian community could proceed against Shell’s parent company. These courts are willing to consider these cases based on their merit, not a mere technicality.  

In the UK, the two Niger Delta communities have already indicated that they will appeal the recent court decision. We hope and expect that Court of Appeal will overturn the ruling to show that the UK justice system is willing to hold UK companies to account for human rights abuse when this is justified based on the substantive facts of that case.    

Finally, to take a step back from legal technicalities, the bottom line is this: How can the headquarters of a multinational company knowingly profit from ongoing abuses in their global operations, while at the same time denying it has any responsibility? The question we should be asking is, if the parent company did not have oversight of the actions of its subsidiary—why not?