Company Law Update

When Does a Parent Company Become Liable for the Actions of its Subsidiary?

This issue was considered recently by the English Court of Appeal.¹ 

The claimants in the case sought damages as a result of environmental damage caused by oil spills from the defendants' pipelines. The defendants were the parent company of the Shell Group and its subsidiary, which was responsible for the oil operations. The central issue was whether a duty of care was owed by the parent to those affected by the subsidiary's actions.

The court applied the three-part test of foreseeability, proximity and reasonableness (i.e. whether it was fair, just and reasonable that such a duty should be imposed). Foreseeability was agreed, but the issues of proximity and reasonableness were disputed.