EVER since the establishment of separate legal personality of companies and their limited liability in the nineteenth century, there have been attempts by voluntary and involuntary creditors of the insolvent or dissolved subsidiary to obtain remedies from the parent company. The orthodox view is that the parent company is neither responsible for the acts and omissions of the subsidiary nor liable for its debts. The Court of Appeal in David Thompson v The Renwick Group plc [2014] EWCA Civ 635 confirmed that the exceptions to this orthodoxy apply only in truly exceptional circumstances. As discussed below, the importance of this judgment extends into the realm of international human rights and environmental litigation and has the potential to set back the existing efforts within the European Union to ensure effective judicial remedy for corporate abuses.

The facts of Thompson v Renwick are as follows. In the 1970s, Mr. Thompson worked as a labourer and driver for two companies that formed part of the Renwick Group. He was engaged in “hand baling” of raw asbestos, which entailed putting raw asbestos onto pallets to be kept in a warehouse. According to Tomlinson L.J., who delivered the judgment of the Court of Appeal, “the conditions in which Mr. Thompson was expected to work are really quite shocking and should be a cause for shame” (at para. [1]). As a result, Mr. Thompson became seriously incapacitated by diffuse pleural thickening and is at increased risk of mesothelioma and lung cancer. Since neither of his employers was solvent or had in place liability insurance, Mr. Thompson started proceedings against the Renwick Group plc, the holding company of the group. Mr. Thompson's case was based on the intermingling of the business of his employers with that of the other companies within the group and their shared use of resources. The relevant question before the court was whether the parent company owed a direct duty of care to Mr. Thompson in respect of his exposure to asbestos at work.

Judge Platts in the Manchester County Court found in favour of the claimant. The judge concluded that the defendant had taken control of the daily operations of one of Mr. Thompson's employers to a sufficient extent to give rise to a duty of care to Mr. Thompson. The basis of this finding was the fact that the holding company had appointed a director of the employer with responsibility for health and safety matters through which it exercised control.

The Court of Appeal disagreed. In running the day-to-day operations of Mr. Thompson's employer, the director was not acting on behalf of the parent company. He was acting pursuant to his fiduciary duties owed to the company of which he was a director.

After having dismissed the basis of Platts J.'s judgment, the Court of Appeal turned to the question whether the totality of evidence was nevertheless sufficient to justify the imposition of a duty of care on the parent company under the threefold test of Caparo v Dickman [1990] 2 A.C. 605, which is based on foreseeability, proximity and fairness. To answer this question, the Court of Appeal examined a recent and important case of Chandler v Cape [2012] EWCA Civ 525; [2012] 1 W.L.R. 3111; A. Sanger [2012] C.L.J. 478. This case also dealt with the duty of care of a parent company to protect employees of a subsidiary from the risk of injury arising out of exposure to asbestos at work. Chandler v Cape was the first and only case in which a parent company was held liable for breach of a direct duty of care for the health and safety of its subsidiary's employees. However, the Court of Appeal in Thompson v Renwick distinguished Chandler v Cape on the ground that the facts of the two cases were “far removed” (at para. [29]). There were two crucial differences. Firstly, in Chandler v Cape, not only did the parent company employ a group medical advisor who was responsible for health and safety of all employees within the group and a scientific officer who was involved in seeking ways of suppressing asbestos dust, but also many aspects of the production process at the subsidiary were discussed and authorised by the parent company. In Thompson v Renwick, the parent company merely appointed a director of the subsidiary with responsibility for health and safety at the level of the subsidiary. Secondly, the parent company in Chandler v Cape had superior knowledge and expertise of health and safety matters. The parent company in Thompson v Renwick held shares in companies primarily in the leisure field, and thus had no superior knowledge and expertise of asbestos-related health and safety issues.

All in all, the Court of Appeal in Thompson v Renwick refused to circumvent the principles of separate legal personality of companies and their limited liability by imposing a direct duty of care on the parent company to protect the employees of its subsidiary from the risk of injury arising out of exposure to asbestos at work. By stating twice that the facts of Chandler v Cape were “far removed” (at paras [29] and [36]), the Court of Appeal confined this case to its own facts and confirmed that the exceptions to the orthodox view apply only in truly exceptional circumstances.

Thompson v Renwick has the potential to set back the existing efforts within the EU to ensure effective judicial remedy for corporate human rights and environmental abuses. A key problem of global governance is how to make multinational enterprises accountable for the human rights and environmental violations committed by their subsidiaries in developing countries. The solution to this problem must be multifaceted and include a wide range of stakeholders and actors. International litigation is considered to be a part of the solution. This is confirmed, among others, by the UN Guiding Principles on Business and Human Rights (see, in particular, principle 25), which the EU and its Member States have pledged to implement (European Commission, “A Renewed EU Strategy 2011–14 for Corporate Social Responsibility” COM(2011) 681 final).

Access to an effective judicial remedy in the EU depends on many factors, including the applicable rules of adjudicatory jurisdiction and choice of law, system of legal fees, availability of legal aid, evidentiary matters, and the content of the substantive law applicable to the human rights and environmental abuse. Scholars, activists and policy-makers who advocate a greater role for the EU courts in policing multinationals point to the English law of torts as a body of law that contains promising solutions. Chandler v Cape is often mentioned as a precedent or “a source of inspiration” for the imposition of a duty of care on the holding company of a multinational that is incorporated in the EU for the health and safety of employees and others affected by the acts and omissions of its overseas subsidiary (e.g. L. Enneking, Foreign Direct Liability and Beyond (The Hague 2012); R. Lindsay et al. (2013) 6 Journal of World Energy and Business 2). The influence of Chandler v Cape extends beyond scholarly and policy papers. In January 2013, the District Court of The Hague in the Netherlands rendered a judgment in Akpan and others v Royal Dutch Shell and Shell Petroleum Development Co of Nigeria Ltd (2013) L.J.N. BY9854, in which it discussed and distinguished Chandler v Cape in order to conclude that, under Nigerian law, the duty of care should not be imposed on Royal Dutch Shell for the health and safety of all those affected by the acts and omissions of its Nigerian subsidiary. Chandler v Cape was a promising decision that sparked a debate on the viability of international human rights and environmental litigation in the UK and, more generally, in the EU. By confining this case to its own facts, the Court of Appeal in Thompson v Renwick cast shadow over the optimism exhibited by the participants in this debate. Following the confirmation that the exceptions to the principles of separate legal personality of companies and their limited liability apply only in truly exceptional circumstances, the Court of Appeal also effectively confirmed that the victims of corporate human rights and environmental abuses are unlikely – apart from cases exhibiting the same key features as Chandler v Cape – to obtain remedies from the parent company. The Dutch case of Akpan v Royal Dutch Shell further indicates that no two cases of corporate human rights and environmental abuse are the same, and that it will be hard to find cases sufficiently similar to Chandler v Cape. The confirmation of their low chance of winning the case also means that victims of corporate abuses will find it increasingly difficult to obtain representation on a “no win, no fee” basis that, at least in the UK, is the only way of funding international human rights and environmental litigation. Coupled with the uncertainties inherent in the conflict of laws issues raised by this type of litigation and the recent claimant-unfavourable changes in the system of legal fees introduced by the Legal Aid, Sentencing and Punishment of Offenders Act 2012, Thompson v Renwick makes the UK an inhospitable place for international human rights and environmental litigation. Given the far-reaching optimism inspired by Chandler v Cape, there is every reason to believe that Thompson v Renwick will spread its influence beyond the borders of the English law of torts and represent a set back to the existing international efforts to ensure effective judicial remedy for corporate abuses.

Ultimately, the Thompson v Renwick and Chandler v Cape sagas show that international efforts to ensure effective judicial remedy for corporate abuses cannot rely on idiosyncratic municipal solutions. A European Union that is genuinely committed to implementing the UN Guiding Principles on Business and Human Rights should seek to develop truly international and effective standards of duty of care that European multinationals should respect in their domestic and overseas operations.