Multinational corporations (MNCs) have great power but little responsibility. MNCs are 69 of the 100 largest economic entities in the world, which makes them more economically powerful than some countries. These powerful corporations work in poorly regulated zones to get the cheapest prices for labor, breeding potential for massive violations of human rights. Often, the US or UK parent company will incorporate a foreign subsidiary in the country of operations. This creates a legal shield between the subsidiary’s actions and the parent company’s liability. However, if the subsidiary violates human rights, this corporate structure makes it very difficult for victims to sue the parent company in the US or UK.
Recent decisions in the US and UK Supreme Courts highlight a developing split in approaches. The UK is beginning to hold UK parent companies accountable for human rights violations committed by their foreign subsidiaries, whereas the US is still maintaining a strong shield against US parent company liability.
Why do victims want to sue in the United States or United Kingdom rather than their home country? The three main reasons are speed, money, and access to justice. First, although claims can take many years in US or UK courts, a claim in foreign courts can take decades. Second, normally, the parent company will have more financial resources than a subsidiary to pay damages to the victims. Finally, it can be impossible to get a judgement against a powerful multinational company in domestic courts. As King Emere Okpabi (tribal king of the Ogale community in the Niger Delta, claimants in Okpabi v. Royal Dutch Shell) stated, “[y]ou can never, never defeat Shell in a Nigerian Court … Shell is Nigeria and Nigeria is Shell.”
The first hurdle that plaintiffs must overcome when bringing a parent liability case is forum non conveniens. Under this doctrine, courts can dismiss a case if there is another court that is better suited to hear the case. This is difficult for foreign plaintiffs to overcome because they have to show that the UK or US courts are better suited to hear the case than their home country where the violations took place. If plaintiffs cannot overcome this hurdle, they lose their US or UK case.
Foreign plaintiffs can bring litigation in the United States for extraterritorial human rights violations under the Alien Torts Statute (ATS). The statute gives federal district courts jurisdiction to hear civil claims brought by “an alien for a tort only, committed in violation of the law of nations.” The Second Circuit Court of Appeals in Filártiga v. Peña-Iralainterpreted the “law of nations” to include human rights, thereby giving the U.S. extraterritorial jurisdiction over all human rights claims. This case, and subsequent jurisprudence, led to viable ATS litigation against corporations. However, the US Supreme Court in Kiobel v. Royal Dutch Petroleum Co. narrowed the scope and held that plaintiffs could only use the ATS in cases where there was a “sufficient[ly] force[ful]” nexus to the United States.
This July’s US Supreme Court decision in Nestlé USA, Inc. v. Doe makes it clear that it is very difficult for plaintiffs to prove this nexus and sue under the ATS. In that case, the plaintiffs were West African children enslaved by cocoa plantations. They sued US corporations Nestlé and Cargill, which were large buyers of the cocoa beans. The plaintiffs alleged that Nestlé was liable under the ATS because it controlled the supply chain and provided financial incentives and training programs to the plantation owners. Eight justices found that general corporate oversight was not a tight enough nexus to the US and so did not meet Kiobel’s high bar. Additionally, in a split 5-4 decision, the Supreme Court found that the ATS does not create a cause of action to sue corporations. Therefore, the case was dismissed.
In the United Kingdom, Vedanta Resources PLC and another v. Lungowe and others holds that plaintiffs can bring a case if the U.K. parent company had “control, direction, [and] intervention” over the foreign subsidiary’s actions. Examples of sufficient control includes evidence of management control, group wide policies, group wide compliance, and parental supervision and control over the subsidiary’s actions.
This February’s UK Supreme Court decision in Okpabi and others v. Royal Dutch Shell Plc and another shows that this is a lower bar than the US standard. There, the claimants were 42,500 residents of Ogoniland in the Niger Delta. They sought to hold the English parent company, Royal Dutch Shell, responsible for its Nigerian subsidiary’s oil spills. According to a UN Environment Program report, these oil spills have polluted the Niger Delta so the water is contaminated with the carcinogen benzene over 900 times above the WHO guidelines. Moreover, an Amnesty reportfound that, because there has been no meaningful clean-up, the water and land is unusable. Applying Vedanta, the Supreme Court found the case could not be summarily dismissed because the English company exercised a high degree of control and direction over the subsidiary’s activities. In particular, U.K. executive trips to Nigeria, global health, safety and environmental policies and standards, monitoring of those policies, and monthly reporting from the subsidiary to the parent all showed the UK company controlled the Nigerian subsidiary. Therefore, this case is now proceeding to the substantive question.
Parent-subsidiary human rights cases require a fact-specific analysis to show that the parent company exercised enough control over the subsidiary. In Okpabi, the UK Court found that general corporate policies were sufficient to overcome the forum non conveniens question. In contrast, Nestlé held that general corporate policies show an insufficient nexus to the US. As human rights cases continue to be brought, it will be interesting to see how parent company liability jurisprudence in the US and the UK develops.