Group Companies and Climate Justice

Abstract

A string of corporate litigation cases in the United Kingdom highlights the role of corporate group structures in complicating efforts to impose liability on parent companies for the activities of their subsidiaries, particularly where those subsidiaries are located in the Global South. Corporate group structures serve to insulate parent companies against liability for actions of their subsidiaries. This is the case even where economic benefits accrue to parent companies, which are often incorporated in the Global North. These group structures cabin liability for environmental and climate harms within subsidiary companies through reliance on company law principles such as limited liability and separate legal personality. These company law principles allow parent companies to enjoy corporate profits from the activities of their subsidiaries but disavow liability for any environmental damage resulting from such activities. This dichotomy has obvious equity implications, which are exacerbated in the extractive industries and in the context of climate change. Negative climate impacts are and will be felt predominantly in the Global South. In addition, environmental damage removes avenues of climate adaptation for vulnerable populations. But company law principles are not impervious to these equity challenges. These principles have never been absolute and courts have consistently found exceptions to them, although those exceptions have fluctuated in effectiveness and frequency over the years. Recent decisions by the Court of Appeal and Supreme Court in the United Kingdom imposed duties on parent companies for environmental damage caused by their subsidiaries. Cases following the decision in Chandler v Cape Industries illustrate tension between company law as interpreted in the Global North, and climate and environmental justice as experienced in the Global South. Climate change forces a reconceptualization of company law, including transnational corporate liability. This paper argues that these reconsiderations are not only appropriate, but given the contested histories of many of these companies in the Global South, long overdue.