OPINION: Two recent ground-breaking legal judgements in the Netherlands and the UK against Anglo-Dutch supermajor Shell have widened the circumstances in which multinational companies can be held responsible for the activities of subsidiaries.

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On 29 January, a Dutch court found Shell liable for pollution caused by its Nigerian subsidiary in two Niger Delta villages and also ordered Shell to install a leak detection system on an oil pipeline.

Shell claimed the pollution was caused by sabotage, but the court found this was not proved “beyond reasonable doubt". However, the Dutch court did issue an interim judgement saying an oil leak at Ikot Aka Udo was caused by sabotage, but did not establish liability.

Joeri Klein, a lawyer with Dutch firm Deminor Recovery Services, said: “It is likely we will see more of this type of case in the Netherlands and other west European jurisdictions in the years to come,” due to increasing global awareness of environmental and human right issues.

Friends of the Earth’s Dutch affiliate, which represented the villagers, said it would now lobby the European Union to adopt rules on mandatory supply chain due diligence.

According to London law firm Travers Smith, the European parliament “strongly supports such a law and has, unusually, proposed a draft text".

Shell’s second blow came on 12 February when the UK Supreme Court overturned an appeal court decision and ruled Nigerian communities can sue the supermajor in England over oil pollution. Mark Dearn, director of Core — a human rights and environmental advocacy group that intervened in the UK case — said the ruling sends a clear message to multinationals: “You have a duty of care and you will be held to account for human rights abuses and environmental damage caused by subsidiaries you control.”

Building on a successful 2019 case in the UK against Vedanta in Zambia, both Shell judgments will leave corporate lawyers nervously eyeing potential liabilities and looking at ways to shield parent companies with overseas subsidiaries from being sued in their home countries.

(This is an Upstream opinion article.)