English court claim about Colombian oil spills continues to trial

The High Court has given judgment on two preliminary issues in a claim about environmental pollution caused by Colombian oil spills. The defendant, Amerisur, had sought to have the claim dismissed before a full trial by asking the court to decide that:

• A 2-year Colombian law limitation period applied to the claim, which meant that it was out-of-time when it was brought
• Colombian law barred the claim because it was brought against Amerisur Resources Limited, the group’s parent company, but in Colombian law a parent company is not liable for its subsidiary’s actions

We consider each of these preliminary issues below, along with the reasons why the court found against Amerisur.

Background

The claim was brought against Amerisur Resources Limited which, at the time, was the ultimate parent company of Amerisur Exploración Colombia Ltda which owned oil production and development blocks in Colombia. 

The claim related to spillages of crude oil which was being transported from a block owned by Amerisur in 2015. The transportations were intercepted by armed members of the Revolutionary Armed Forces of Colombia (FARC) who commanded the crews to spill the oil. 

The claimants lived in rural communities and were seeking damages in respect of environmental pollution caused by the spills, primarily through watercourse, wetland and soil contamination.

The claim has been brought in the English High Court by 171 claimants and is subject to a Group Litigation Order (GLO). A GLO is an order made by an English court to provide for the case management of claims which give rise to common or related issues of fact or law. 

Limitation period

It was common ground that the applicable law of the claim was Colombian law. The English court determined questions about the applicable law of the claim, and the scope of that applicable law, by reference the version of the Rome II Regulation which has been incorporated into Retained EU Law in the UK. 

Article 15(h) of Rome II contains the general rule, that the applicable law of the claim will govern “the manner in which any obligation may be extinguished and rules of prescription and limitation”. Accordingly, the starting position was that the English court should apply Colombian law to determine what the limitation period was.

There were two potentially relevant Colombian law limitation periods:

• A 2-year limitation period which applied to Colombian group actions
• A 10-year limitation period for ordinary actions

The claimants argued that the 10-year period applied because the Colombian group action procedure (and the associated limitation period) was a procedural matter which the English court was not required to give effect to under Article 1(3) of Rome II (which says that the Regulation does not apply to “evidence and procedure”). However, the court concluded that Article 15(h) has to be construed widely (and, conversely, Article 1(3) has to be construed narrowly) so that Article 15(h) extends to all forms of limitation rules that prevent claimants from seeking remedies (including the 2-year limitation period). Any matters covered by Article 15 will be determined by Colombian law, as the applicable law, even if they are technically procedural matters. 

The court, therefore, had to decide whether the English claim should be characterised as a Colombian group action (so that the 2-year period applied) or an ordinary action (so that the 10-year period applied). The ordinary procedure applied in Colombia by default, so the English court held that claimants should be treated as having brought an ordinary action because they did not make an active choice to bring a Colombian group action (they chose to bring an English claim instead). In particular, the court highlighted that it would not have been consistent with the protection of individual rights to have treated the claimants as if they had chosen a procedure that would defeat their claim because the limitation period would have expired.

The court did also consider whether the English claim was more similar in nature to a Colombian ordinary action or group action. The court said that the English claim (managed through a GLO) was more like an ordinary Colombian action, in particular because claimants had to opt-in rather than opt-out.

Parent company liability in Colombian law

Amerisur also asked the court to rule on whether parent companies (such as Amerisur Resources Limited) could be liable for the actions of their subsidiaries under Colombian law. Both parties’ experts agreed that Colombian law had a principle of separation of legal personality, such that a parent company was not automatically liable for its subsidiary’s actions.

The claimants’ case was that a parent company could still be directly liable if its own actions constituted a legal wrong. Amerisur’s case was that this was based on “fantastic” assumptions which were not explored in evidence but which were, in any event, undercut when Amerisur’s Colombian law expert was cross-examined on a passage in Lungowe v Vedanta (a leading English case on parent company liability). Amerisur’s expert agreed that nothing in Colombian law prohibited the possibility that (as a factual matter) a parent company might have carried out the group’s business as if it was a single commercial undertaking (see our previous briefing on the Supreme Court’s decision in Lungowe v Vedanta). 

The court took this to mean that it was possible that Amerisur Resources Limited could be liable for the spills as a matter of Colombian law (depending on the facts to be found at trial). As such, the court refused to dismiss the claim on the basis of this preliminary issue.

Another parent company liability case heads towards trial

Amerisur’s attempts to have the claims against it dismissed before trial have been frustrated by the English court’s decision that a longer Colombian limitation period applied and confirmation that Colombian law provides for parental liability for acts/omissions of a subsidiary.  

Although the court gave Rome II its orthodox interpretation, it was ready to avoid applying the shorter limitation period largely because the claim was brought in England, not Colombia. Every case will depend on its facts, but this decision may invite claimants to seek to bring claims in England that would otherwise be time-barred if brought on a collective basis in their home jurisdiction. 

The trial of preliminary issues did not include an application for summary judgment which would have considered more directly whether parent company non-liability could be decided without a full trial in this case. However, having established that Colombian law did in principle provide for parent company liability, we note the difficulties that other defendants have had in establishing parent company non-liability without a full trial of the issues. In both Vedanta (see above) and Okpabi v Royal Dutch Shell, the UK Supreme Court has allowed claims against English parent companies to continue because it was arguable that the parent companies’ control over their local subsidiaries meant that they could be liable in tort (see our previous briefing on Okpabi v Royal Dutch Shell).