Vedanta Resources PLC and Another v. Lungowe and Others

UK Supreme Court Upholds Jurisdiction over UK Parent Company in Connection with Zambian Subsidiary Misconduct

United Kingdom (UK) Supreme Court decision upholding jurisdiction and potential liability of a UK parent company in connection with alleged actions of a Zambian subsidiary company that took place in Zambia.

Date of the Ruling: 
Apr 10 2019
Forum: 
Supreme Court of the United Kingdom
Type of Forum: 
Domestic
Summary: 

The claimants in this action are 1,826 citizens of Zambia from four different communities in the Chingola District. The claimants allege harms to their health and ability to farm due to pollution of their sole water source from activities at the Nchanga Copper Mine. The defendants are Konkola Copper Mines (KCM), owner and operator of the mine, and Vedanta Resources PLC (Vedanta), ultimate UK parent company of KCM. The claims arise under common law negligence and breach of statutory duty, as against KCM because of their operation of the mine, and as against Vedanta because of their control of KCM’s compliance with health, safety, and environmental regulations.

Vedanta and KCM’s appeals challenging jurisdiction of the courts of England and Wales were dismissed in both the High Court and the Court of Appeal. Jurisdiction over Vedanta was established by article 4.1 of the Recast Brussels Regulation, allowing any claimants to sue a party domiciled in a member state in that same state, and over KCM as a necessary and proper party to the litigation. Both defendants challenged jurisdiction as an alleged abuse of European Union law. The UK Supreme Court ruled on whether (1) the case was an abuse of EU law, (2) there was a real claim against Vedanta, (3) England was the proper place, and (4) substantial justice could likely be achieved in Zambia.

As to the abuse of EU law, the Court determined in a unanimous opinion that it would be an abuse if Vedanta was being sued solely to establish jurisdiction over KCM, thus opening Vedanta to liability when they would otherwise not be sued. Based on the facts of the case and the rulings of the lower courts, the Court determined that the claimants had a legitimate claim against Vedanta and a desire to obtain judgement against them because of KCM’s doubtful solvency. The claim against Vedanta arose from their direct control and supervision of the mine, high level of intervention, knowledge of the dangers and likelihood of pollution, and published materials in which Vedanta asserted its own responsibility for implementation of environmental control standards. This, the Court determined, was sufficient for Vedanta to incur a duty of care to the claimants.

Next, the Court determined that Zambia was the proper place for litigation because of practical difficulties of getting the claimants to England; the locations of the evidence, relevant actions, and harm; a common language eliminating the need for translation; and because the case would be decided under Zambian law. However, the Court determined that it was probable that the claimants would be unable to obtain substantial justice in Zambia because, in Zambia, the claimants would not have access to funding or to a legal team with enough experience to handle litigation of this size and complexity. Thus, despite the determination that Zambia would be the proper place for the litigation, the Court dismissed the defendants’ appeals and allowed the litigation to continue in the courts of the UK.

Enforcement of the Decision and Outcomes: 

Now that the Supreme Court has decided that the case can proceed in the English courts in relation to both Vedanta Resources and KCM, the parties can proceed to a full trial of the issues. According to the Supreme Court [94], “[i]n the absence of any admissions from the appellants which might serve to narrow the issues (and there are none), large aspects of the claimants’ collective and individual claims will depend upon the presentation of expert evidence. They will include identifying the emissions which actually occurred, and their toxicity, establishing whether the system of operation of the Mine (both in its planning and implementation) fell short of that requisite to satisfy a duty of care, tracing the emissions through to watercourses in the vicinity of the claimants, proving (during a considerable period of time) that these emissions caused damage to particular claimants’ land, business and health, and quantifying (save perhaps in relation to personal injuries) the diminution in the value of business and property thereby caused.”

Groups involved in the case: 
Significance of the Case: 

This case is significant for UK parent companies with subsidiaries operating in other parts of the world. It is now possible for such companies to face liability in the UK for environmental harms caused by their foreign subsidiaries. Crucially, parent companies can be held liable for assuming responsibility in respect of the activities of foreign subsidiaries. The case establishes that parent company liability is not a novel extension of the law of negligence. A parent company may be held to have assumed responsibility for activities of a foreign subsidiary where: a defective policy or inadequate guidance issued by the parent company results in harm to third parties; where a parent company is responsible for the training supervision and enforcement of policies relating to a subsidiary’s activities; and where a parent company holds itself out as exercising supervision and control of a subsidiary’s activities but fails to do so.

For their contributions, special thanks to ESCR-Net member: the Program on Human Rights and the Global Economy (PHRGE) at Northeastern University.