Mass torts and parentco liability
Overseas claimants have increasingly sought to pursue claims in the English courts which arise out of the conduct of overseas subsidiaries of multi-national companies. In Lungowe and Ors v Vedanta Resource Plc and Konkola Copper Mines Plc the Court of Appeal held that the case could proceed in the English courts, as it was sufficiently arguable that the UK parent company owed a duty to the overseas claimants.
- For the English parent company, the relevant jurisdictional gateway is Article 4 of the Brussels Recast Regulation, which precludes the English Court from declining jurisdiction where a defendant is a company domiciled in England and Wales (Owusu v Jackson).
- The English parent company can then act as an anchor defendant for the claimants to bring their claim against the foreign subsidiary in the English Courts, as a “necessary and proper party” (paragraph 3.1(3) of CPR Practice Direction 6B).
- It is necessary to establish that the parent owed a duty of care to the claimants, through the application of normal tortious principles.
In the courts
- The English courts have examined the question of parent company jurisdiction for the alleged torts of an overseas subsidiary in several cases:
- In Vedanta, the Court of Appeal confirmed that the three stage Caparo v Dickman test is the sole basis for establishing a parent’s duty of care. Whether a duty of care will arise in a particular case will, therefore, depend on whether the three elements (foreseeability, proximity and reasonableness) are established; this is a factual analysis which turns on the particular circumstances in each case.
- Although Vedanta did not own the relevant mine licence or have material control of the mine’s operations, the Court held that the claimant’s case on a parent duty of care was arguable. The claimants had identified multiple circumstances which indicated that Vedanta had superior knowledge and expertise regarding Konkola’s operations. In particular Vedanta had:
- published a public sustainability report which stressed that the oversight of all Vedanta’s subsidiaries rests with the board of Vedanta itself, and made express reference to the particular problems at the mine in Zambia
- entered into a management and shareholders agreement by which Vedanta had a contractual obligation to provide Konkola with various support and supervisory functions
- provided detailed and specific HSE training across the Vedanta group
- provided extensive financial support for Konkola
- made various public statements regarding its commitment to address environmental risks and technical shortcomings in Konkola’s mining infrastructure, and
- exercised a high degree of control over Konkola’s operational affairs.
- However, the Court of Appeal emphasised that it would not engage in a mini-trial regarding the existence of a duty of care.
What this means
This area of law is far from settled and will continue to be the subject of intense scrutiny. If jurisdiction is upheld in Vedanta (and depending on what happens in the Okpabi and Unilever cases), this may lead to an increase in parent companies being sued in the English courts for the acts of their overseas subsidiaries. These decisions are, however, highly fact-specific and only responding to jurisdictional challenges at this stage. The Vedanta defendants recently applied for permission to appeal to the Supreme Court.
Although the Court of Appeal judgment in Vedanta appears to increase the likelihood that such cases will be brought in the English courts, the appeal of the English courts to overseas claimants is likely to depend far more on how the claims are treated once they fall to be considered on their merits. If the Court finds at trial that a duty of care was owed by Vedanta to the claimants, this would be the first reported case in which a parent company has been found to owe a duty of care to a third party/non-employee affected by the operations of a subsidiary (overseas or domestic).
It is worth noting the Court of Appeal's commentary in relation to access to justice, which perhaps indicates that the English courts may be reluctant to become a long term forum for this type of case. The Court noted “There must come a time when access to justice in this type of case will not be achieved by exporting cases, but by the availability of local lawyers, experts, and sufficient funding to enable the cases to be tried locally”.
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