As respect for human rights standards moves from being a best to a necessary practice, parent companies are seeing an increase in instances in which they are being held legally accountable for their global subsidiaries’ alleged human rights abuses. The outcome of these cases have high-stakes consequences, which companies and their in-house counsel must begin to anticipate – they could open the door to an increasing number of lawsuits filed against companies for alleged failures to comply with human rights standards at all levels of the corporate structure. At the same time, international organisations are promulgating globally recognised standards for companies to bring their human rights practices into compliance. While the threat of parent company liability looms larger than ever before, such suits can be staved off and abuses curtailed, by complying with these standards and implementing human rights focused practices.

Understanding the risk of parent company litigation

Parent companies need to be aware of the growing trend of parties bringing claims against companies headquartered in Europe and North America for offences allegedly committed by their subsidiaries, contractors or affiliates located in different jurisdictions. This trend of upstream liability coincides with a time when climate change lawsuits are on the rise, making energy companies particularly susceptible to the threat of litigation; however, potential liability of the parent company is not limited to climate change litigation alone.

Oct-Dec 2018 issue

King & Spalding LLP