Parent company can have a duty of care to victims of foreign subsidiary’s actions

10/04/19

On 10 April 2019 the Supreme Court held that the courts of England and Wales do have jurisdiction over a group claim against a parent company and its foreign subsidiary for actions by the subsidiary which allegedly caused environmental damage and human rights impacts. It refused an appeal by Konkola Copper Mines plc (KCM, a Zambian company) and Vedanta Resources Plc (its UK parent) against an order allowing a group of nearly 2,000 Zambian farmers to issue proceedings in the courts of England and Wales, and to serve out of the jurisdiction on KCM. In so doing, the Court clarified key areas of tort law and of the court’s jurisdiction to hear such cases.

The Claimants seek damages for negligence and breach of statutory duty arising out of the discharge of toxic matter from the KCM mine into waterways, causing damage to their health and property.  The claim against the anchor defendant – Vedanta – relies on its level of control and direction over KCM’s mining operations, health and safety compliance and environmental controls. The claim against KCM relies on the “necessary or proper party” gateway for service out of the jurisdiction.

Vedanta and KCM appealed against the decision of the judge at first instance and the Court of Appeal to allow jurisdiction. The Supreme Court rejected the appeal and held that the courts of England and Wales did have jurisdiction on the following grounds:

1. Existing tort law principles mean a parent company can have a duty of care to victims of an action by a foreign subsidiary.
2. Accordingly, there is a real triable issue against Vedanta concerning whether it has assumed responsibility for the actions of its subsidiary.
3. Service out of the jurisdiction on KCM was not an abuse of the Recast Brussels I Regulation.
4. Zambia would have been the proper place for the litigation, provided that there was not a real risk of the denial of substantial justice there. However, the Claimants are all in extreme poverty, cannot obtain legal aid and conditional fee arrangements are unlawful in Zambia. Furthermore, there are not sufficiently experienced legal teams in Zambia to take a claim of this complexity against a well-resourced defendant like KCM, so the claim can be heard in the English courts.

The judgment is here.