Posts Tagged Mother company
Dutch Shell Nigeria / Royal Dutch Shell ruling: anchor jurisdiction confirmed against Nigerian daughter.
Update 21 March a mirror case is going ahead in the High Court in London: jurisdiction against the mother company again is easily established because of Shell’s incorporation in the UK (its corporate headquarters are in The Netherlands (which is also where it has its tax residence). The High Court has allowed proceedings against Shell Nigeria to be joined. Shell is expected to argue forum non conveniens at a later stage.
Postscript 1 March 2016 in Xstrata Limited /Glencore Xstrata plc ., similar issues of corporate social responsibility and liability for a subsidiary’s actions are at stake.
As I have reported in December, the Gerechtshof Den Haag confirmed jurisdiction against Shell’s Nigerian daughter company. (Please note the link first has the NL version of the judmgent, followed by an EN translation). The proceedings can be joined with the suit against the mother company Royal Dutch Shell (RDS, headquartered in The Netherlands whence easily sued on the basis of Article 4 Brussels I Recast (Article 2 of the Regulation applicable to the proceedings)). I have finally gotten round to properly reading the court’s judgment (which deals with jurisdiction issues only). As I have pointed out, Article 6(1) (now 8(1) of the Brussels I Recast) cannot be used against defendants not domiciled in the EU. Dutch rules on joinders applied therefore. The Gerechtshof however took CJEU precedent into account, on the basis that the preparatory works of the relevant Dutch rules on civil procedure reveal that they were meant to be so applied. Consequently a lot of CJEU precedent is reviewed (the most recent case quoted is CDC). The Gerechtshof eventually holds that lest it were prima facie established that liability of RDS for the actions committed by its Nigerian daughter is clearly unfounded, use of RDS as an anchor can go ahead. Only clearly abusive attempts at joinders can be sanctioned. (A sentiment most recently echoed by the CJEU in Sovag).
The Gerechtshof Den Haag, without being definitive on the issue, also suggested that applicable law for considering whether merger operations inserting a new mother company were abusive (merely carried out to make Royal Dutch Shell escape its liability), had to be addressed using ‘among others’ the lex incorporationis (at 3.2). That is not undisputed. There are other candidates for this assessment.
The judgment being limited to jurisdiction, this case is far from over.
European private international law, second ed. 2016, Chapter 8, Headings 22.214.171.124., 8.3.2
Anchor defendant, Brussel I Verordening, Brussels I Regulation, Chandler v Cape, Corporate social responsibility, CSR, EEX Verordening, Extraterritoriality, http://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:RBDHA:2013:BY9854, https://milieudefensie.nl/publicaties/bezwaren-uitspraken/shell-rechtszaak-memorie-van-grieven-van-shell-in-hoger-beroep, Internationaal privaatrecht, IPR, JR, Jurisdiction Regulation, Kiobel, Lex loci damni, Lex loci delicti commissi, Milieudefensie, Mother company, Onrechtmatige daad, piercing, Piercing the corporate veil, Regulation 44/2001, Regulation 864/2007, Rome II Regulation, Rylands v Fletcher, Shell, Shell Nigeria, Tort
Update 21 June 2016 see also application with respect to the extraterritorial impact of the US ‘Rico’ (anti-racketeering) Act in RJR Nabisco, Inc. V European Community.
In Ranza v Nike, the Court of Appeal for the ninth circuit confirmed the high hurdle to establish personal jurisdiction over foreign corporations in the US, following the Supreme Court’s decisions in Kiobel and Bauman /Daimler. Trey Childress has good summary here and I am happy largely to refer.
Loredana Ranza is a US citisen, resident in the EU (first The Netherlands; Germany at the time of the court’s decision). She seeks to sue against her Dutch employer, Nike BV, and its parent corporation, Nike inc. for alleged violation of federal laws prohibiting sex and age discrimination. The Dutch equality Commission had earlier found the allegations unfounded under Dutch law.
Of particular interest are the Court’s views on the attributability test /piercing the corporate veil following Daimler and Kiobel. The Court held (p.15 ff) that prior to Daimler, personal jurisdiction over the mother company could be established using either the agency or the alter ego test, with the former now no longer available following Daimler. Under the Agency test, effectively a type of abus de droit /fraus /fraud, plaintiff needed to show that the subsidiary performed services which were sufficiently important to the foreign corporation that if it did not have a representative to perform them, the corporation’s own officials would undertake to perform substantially similar services. Daimler, the Court suggested in Ranza, held that the agency test leads to too broad a jurisdictional sweep. That leaves the alter ego test: effectively, whether the actions prima facie carried out by the subsidiary, are in fact carried out by the mother company for it exercises a degree of control over the daughter which renders that daughter the mother’s alter ego. Not so here, on the facts of the case: Nike Inc, established in Oregon, is heavily involved in Nike BV’s macromanagement, but not so ‘enmeshed’ in its routine management of day-to-day operation, that the two companies should be treated as a single enterprise for the purposes of jurisdiction.
For good measure, the Court also confirmed application of dismissal of jurisdiction on the basis of forum non conveniens.
764 F. 3d 129, Alien Tort Statute, alter ego, attributability, Comity, Corporate social responsibility, CSR, DaimlerChrysler, DaimlerChrysler v Bauman, daugther company, Extraterritoriality, FNC, Forum non conveniens, http://cdn.ca9.uscourts.gov/datastore/opinions/2015/07/16/13-35251.pdf, http://www.supremecourt.gov/opinions/13pdf/11-965_1qm2.pdf, https://www.law.cornell.edu/supremecourt/text/15-138?utm_source=@USSupremeCourt, Human rights, Jurisdiction, Kiobel, Mother company, Nike, Piercing the corporate veil, Regulation 1215/2012, Rio Tinto, RJR NABISCO, INC. v. EUROPEAN COMMUNITY, SC, United States Supreme Court, USSC
Postscript 1 March 2016 in Xstrata Limited /Glencore Xstrata plc ., similar issues of corporate social responsibility and liability for a subsidiary’s actions are at stake.
Postscript 18 December: quick update, more to follow: in an interim judgment, jurisdiction was upheld.
I have earlier referred to Shell’s arguments in appeal (in Dutch) on the specific issue of jurisdiction, which may be found here . Judgment in first instance in fact, as I reported, generally was quite comforting for Shell (and other holding companies in similar situations) on the issue of substantive liability.
However on jurisdiction, the Dutch court’s approach of joinders under residual national jurisdictional rules, was less comforting. The rules on joinders, otherwise known as ‘anchor defendants’, in the Brussels regime (Brussels I as well as the Recast) do not apply to defendants domiciled outside of the EU. Consequently national rules of civil procedure decide whether an action against a daughter company, established outside of the EU, can be successfully anchored to an action against the mother company (against which jurisdiction is easily established per Article 4 of the Recast, Article 2 of the former Regulation). In first instance, the Court at The Hague ruled in favour of joining a non-EU defendant to a case against its mother company in The Netherlands.
In its submission for appeal, Shell (with reference to relevant national case-law) borrows heavily from CJEU case-law on what was Article 6(1) (now Article 8(1)), suggesting that Dutch residual law was meant to apply as a mirror the European regime, with one important difference: precisely the issue that under the Dutch regime, none of the parties need to be domiciled in The Netherlands. Any jurisdictional rule which leads the Dutch courts to accept jurisdiction against one defendant, even if that anchor defendant is not domiciled in the country, can lead to others being drawn into the procedure. This means, so Shell suggests, that the Dutch rule (Article 7(1) of the Dutch code of civil procedure) is more in need of precautions against abuse, than the equivalent European rule.
As part of the efforts to avoid abuse, the Dutch courts need to make a prima facie assessment of the claims against the anchor defendant: for if those claims are spurious, anchoring other claims to such loose ground would be abusive. On this point, the Court of Appeal will have to discuss the corporate veil, piercing it, Chandler v Cape etc. Shell’s submission does not in fact argue why piercing needs to be assessed by the lex causae (here: Nigerian law as the lex loci damni) and not, for instance, by the lex fori. I doubt the Court of appeal will raise it of its own accord. (See here for a consideration of the issues in an unrelated area and further pondering here).
A little bird tells me that appeal judgment will be issued on 18 December. I may or may not be able to review that before the Christmas break. In the negative, it will have to be an Epiphany posting. (Potentially in more than one meaning of the word).
Artikel 7 lid 1 Rv, Brussel I Verordening, Brussels I Regulation, Chandler v Cape, Corporate social responsibility, CSR, ECLI:NL:GHDHA:2015:3586, ECLI:NL:GHDHA:2015:3587, ECLI:NL:GHDHA:2015:3588, ECLI:NL:RBDHA:2013:BY9854, EEX Verordening, Extraterritoriality, http://uitspraken.rechtspraak.nl/#ljn/BY9854, http://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:GHDHA:2015:3586, https://milieudefensie.nl/publicaties/bezwaren-uitspraken/shell-rechtszaak-memorie-van-grieven-van-shell-in-hoger-beroep, Internationaal privaatrecht, IPR, JR, Jurisdiction Regulation, Kiobel, Lex loci damni, Lex loci delicti commissi, Lis alibi pendens, Milieudefensie, Mother company, Onrechtmatige daad, piercing, Piercing the corporate veil, Regulation 44/2001, Regulation 864/2007, Rome II Regulation, Rylands v Fletcher, samenspraak, Shell, Shell Nigeria, Tort, tussenvonnis, Xstrata Limited / Glencore Xstrata plc
Update 20 June 2016 the strict approach was confirmed in C-155/14P Evonik.
There is no general EU rule on the piercing of the corporate veil. Neither company law nor tort law is sufficiently (or in the case of tort law even embryonically) harmonised to be able to speak of much EU influence here. However in EU competition law, the principle is more or less established and may, one suspects, inspire in other areas, too. In Eni, the ECJ confirmed on 8 May the strong presumption of attribution in the case of shareholder control.
It is established case-law under EU competition law that the conduct of a subsidiary may be imputed, for the purposes of the application of Article 101 TFEU, to the parent company particularly where, although having separate legal personality, that subsidiary does not autonomously determine its conduct on the market but mostly applies the instructions given to it by the parent company, having regard in particular to the economic, organisational and legal links which unite those two legal entities. In such a situation, since the parent company and its subsidiary form part of a single economic unit and thus form a single undertaking for the purpose of Article 101 TFEU, the Court has repeatedly held that the Commission may address a decision imposing fines to the parent company without being required to establish its individual involvement in the infringement.
In the particular case in which a parent company holds all or almost all of the capital in a subsidiary which has committed an infringement of the European Union competition rules, there is a rebuttable presumption that that parent company exercises an actual decisive influence over its subsidiary. In such a situation, it is sufficient for the Commission to prove that all or almost all of the capital in the subsidiary is held by the parent company in order to take the view that that presumption is fulfilled.
In addition, in the specific case where a holding company holds 100% of the capital of an interposed company which, in turn, holds the entire capital of a subsidiary of its group which has committed an infringement of European Union competition law, there is also a rebuttable presumption that that holding company exercises a decisive influence over the conduct of the interposed company and also indirectly, via that company, over the conduct of that subsidiary.
In the present case, for the entire duration of the infringement in question, Eni held, directly or indirectly, at least 99.97% of the capital in the companies which were directly active within its group in the sectors in which there had been a violation of competition law. The ECJ held that in particular the absence of management overlap between Eni and the daughter companies, was not enough to rebut the presumption of the companies being a single economic unit. In competition law, therefore, the corporate veil may be quite easily pierced in a holding context, which undoubtedly is not the approach which many Member States take outside of the competition law area.
The waters therefore on the piercing of the corporate veil other than in the area of competition law, remain quite deep. This has an impact on the conflicts area, in particular in the application of the Rome II Regulation and the debate on corporate social responsibility, on which I have reported before on this blog.
postscript: point made in e.g. the UKSC on 12 June 2013, in Petrodel v Prest (a matrimonial assets case which was decided on the basis of trust), where Lord Neuberger stated obiter “if piercing the corporate veil has any role to play, it is in connection with evasion”.
Lord Sumption’s take was “there is a limited principle of English law which applies when a person is under an existing legal obligation…which he deliberately evades or whose enforcement he deliberately frustrates by interposing a company under his control. The court may then pierce the corporate veil for the purpose, and only for the purpose, of depriving the company or its controller of the advantage that they would otherwise have obtained by the company’s separate legal personality“. He added ‘The principle is properly described as a limited one, because in almost every case where the test is satisfied, the facts will in practice disclose a legal relationship between the company and its controller which will make it unnecessary to pierce the corporate veil.’
Lord Clarke, agreeing with Lord Mance and others, stated “the situations in which piercing the corporate veil may be available as a fall-back are likely to be very rare”.
2016] EWCA Crim 1043, Attribution, C-155/14P, Case C-508/11 P, CJEU, COJ, Competition law, Corporate social responsibility, CSR, Daughter company, ECJ, Eni, Evonik, http://www.bailii.org/ew/cases/EWCA/Crim/2016/1043.html, http://www.supremecourt.uk/decided-cases/docs/UKSC_2013_0004_Judgment.pdf, imputability, matrimonial property, Mother company, Petrodel v Prest, Piercing the corporate veil, R v Powell and Westwood, Rome II, Supreme Court, Tort, Trust, UKSC, United Kingdom,  UKSC 34
Postscript/2015: Shell’s arguments in appeal (in Dutch) on the specfic issue of jurisdiction, may be found here
As reported earlier, Shell’s top holding has been hauled before a Dutch court by a Dutch environmental NGO (Milieudefensie), seeking (with a number of Nigerian farmers) to have the mother holding being held liable for environmental pollution caused in Nigeria. Judgment came yesterday and generally is quite comforting for Shell (and other holding companies in similar situations).
The court stuck to its decision to join the cases, hence allowing Shell Nigeria to be pursued in the Dutch Courts, together with the holding company (against which jurisdiction was easily established under the Brussels I Regulation). On this point, one imagines, Shell might appeal.
The court held against application of the Rome II Regulation for temporal reasons and did therefore not entertain any (unlikely) options in that Regulation which may have led to Dutch law: the events which gave rise to the damage occurred before the entry into force of that Regulation. The Court therefore applies lex loci damni. If I am not mistaken, prior to Rome II, The Netherlands applied a more or less complex conflicts rule, not necessarily leading to lex loci damni, neither to lex loci delicti commissi, which was the rule in most EU Member States prior to the entry into force of the Rome II Regulation.
Nigerian law applied and any route to apply Dutch law was rejected. Incompatibility with Dutch ordre public, for instance, was not withheld. Nigerian law running along common law lines, the court ran through negligence in tort, applied to environmental cases, leading amongst others to the inevitable Rylands v Fletcher. The court found that the damage occurred because of sabotage, which under Nigerian law in principle exhonerated Shell Nigeria. Only for two specific instances of damage was liability withheld, for Shell Nigeria had failed to take basic precautions.
The conditions of Chandler v Cape (2012) to establish liability for the holding company, were not found to be met in the case at issue. The court did not establish a specific duty of care under Nigerian law (with the loop to the English common law) for Royal Dutch Shell (RDS), the mother company. A general CSR committment was not found not to alter that.
No doubt to be continued in various forms of appeal.
Brussel I Verordening, Brussels I Regulation, Chandler v Cape, Corporate social responsibility, CSR, EEX Verordening, Extraterritoriality, http://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:RBDHA:2013:BY9854, https://milieudefensie.nl/publicaties/bezwaren-uitspraken/shell-rechtszaak-memorie-van-grieven-van-shell-in-hoger-beroep, Internationaal privaatrecht, IPR, JR, Jurisdiction Regulation, Kiobel, Lex loci damni, Lex loci delicti commissi, Milieudefensie, Mother company, Onrechtmatige daad, piercing, Piercing the corporate veil, Regulation 44/2001, Regulation 864/2007, Rome II Regulation, Rylands v Fletcher, Shell, Shell Nigeria, Tort
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