The Case for Eco-Liability: Post Okpabi Justifications for the Imposition of Liability on Parent Companies for Damage caused to the Environment by their Subsidiaries
| Author | Eoin Jackson |
| Position | LLB (Trinity College, Dublin), '23. Managing Editor for Trinity College Law Review |
| Pages | 61-85 |
2021
LSE LAW REVIEW
61
The Case for Eco-Liability: Post Okpabi Justifications for
the Imposition of Liability on Parent Companies for
Damage caused to the Environment by their Subsidiaries
Eoin Jackson*
ABSTRACT
This article seeks to argue for the imposition of liability onto parent companies for the damage
to the environment c aused by their subsidiaries. ‘Eco-liability’ will be suggested to be an
appropriate means through which firms can be encouraged to engage in sustainable practices. This
argument will be made in reference to the recent decision in Okpabi v Royal Dutch Shell,1 which,
although somewhat positive in light of the facts of the case, was too limited in scope to take
adequate account of the needs of the environment as a stakeholder. It will be posited t hat the
environment must be recognised as a stakeholder due to its considerable and growing influence
over corporate governance and practice. The environment will be considered a secondary
stakeholder due to this influence. The independence of the environment as a stakeholder shall be
demonstrated through an examination of the legal, social and commercial emphasis that is placed
on its statu s within th e corporate environment. Subsequently, this article submits that the
environment has needs that should be recognised through an appropriate legal framework. It will
be contended that this legal framework cannot be achieved through case law, with the Okpabi
judgement representing the limitations on a case-based approach to environmental accountability.
It will thus be proposed tha t statutory eco-liability be introduced, to ensure sufficient
accountability exists for corporations that do not operate in a sustainable manner.
* LLB (Trinity College, Dublin), ’23. Managing Editor for Trinity College Law Review. The
author would like to acknowledge fellow Trinity students Benjamin C onlon and Matthew
O’Shea for their insights and assistance with the initial draft of the piece.
1 Okpabi and Others v Royal Dutch Shell plc and Another [2021] UKSC 3.
62
The Case for Eco-Liability
Vol. VII
INTRODUCTION
Recent years have seen an increased recognition of the obligation on
corporations to act in a manner conducive to creating a sustainable environment.
This is reflected in the rise of successful litigation seeking to hold companies
accountable for actions that contribute to the climate crisis.2 This article seeks to
argue that this accountability should now be expanded into the realm of limited
liability. Specifically, it proposes that a statutory regime be established that allows
for a parent company to be held liable for da mage to the environment caused by
one of their subsidiaries. The justifications and potential criticisms that will be
addressed in this article shall make a particular reference to the recent case of
Okpabi v Royal Dutch Shell,3 which, it will be submitted, represents a relatively
positive step forward for eco-liability, though one that should be caveated by
noting how it also illustrates the supremacy of an eco-liability statute
I. THE ECOLOGICAL FLAWS OF LIMITED LIABILITY –
SHAREHOLDER PRIMACY AND THE ENVIRONMENT AS A
STAKEHOLDER
In justifying the implementation of eco-liability, it is pertinent to examine
the flaws within the current principle of limited liability. Limited liability has been
defined by Keane as ‘where the liability of the members for the debts and wrongs
of the company can be limited to the amount unpaid on the shares which they
own in the company’.4 The doctrine arose as a result of the nee d to protect the
individual shareholder and encourage them to support industrial revolution e ra
corporations in the race to modernisation.5 Its coupling with the doctrine of
separate legal personality has been described as the ‘hallmark of the capitalist
2 Vereniging Milieudefensie and Others v Royal Dutch Shell plc [2021] Hague District Court
C/09/571932 / HA ZA 19-379 and Sharma v Minister for the Environment [2021] FCA 560.
3 [2021] UKSC 3.
4 Brian Hutchinson, Keane on Company Law (5th edn, Bloomsbury Professional 2016) 5.
5 E.A. French, ‘The Origin of General Limited Liability in the United Kingdom’ (1990)
21(18) Accounting and Business Research 15.
To continue reading
Request your trial