UK Supreme Court Considering Parent Company Liability For Environmental Harm Caused By Overseas Subsidiaries

Author:Ms Anita Lloyd
Profession:Squire Patton Boggs LLP
 
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In Vedanta Resource PLC and another v Lungowe and others the UK Supreme Court has held that a claim for negligence and breach of statutory duty against a mining company based in Zambia and its English parent can be heard by the UK courts.

In so doing, this landmark decision has potentially opened the door to tortious claims against UK parent companies by persons based outside of the UK who have been impacted by acts of foreign subsidiaries.

The Facts

A claim was brought by a group of 1,826 farmers living in four rural communities in the Chingola District of Zambia. They brought a claim on the basis that, since 2005, the communities' only source of drinking water, for themselves and their livestock, and for the irrigation of their crops, has been polluted by repeated discharges of toxic matter from the Nchanga Copper Mine. The claimants launched a negligence claim against both the immediate owner of the mine Konkola Copper Mines (KCM) and its UK parent, Vedanta Resources plc (Vedanta).

The claim was brought in the English courts and, unsurprisingly, the defendants challenged the jurisdiction of the English court to hear this claim. The defendants reasoned that the real focus of the litigation was on the owner of the mine, KCM, as it was this company who had allegedly committed the negligent act. They argued that if a successful claim was brought against the parent company, this would be imposing a new duty of care on the parent for acts of the subsidiary. The defendant's relied heavily on Chandler v Cape, the first case to hold that a UK parent company could owe a duty of care to a third party because of the actions of its subsidiary. It was asserted that, since the case at hand did not factually fit neatly into a "Chandler type" scenario, this would amount to an attempt at a "novel and controversial extension of the boundaries of the tort of negligence". On the basis that no duty of care was owed by the parent, the defendants' position was that the claim should only be brought against KCM, and in the Zambian courts.

The Decision

Notwithstanding the defendants' arguments, and in line with the decisions of the High Court and the Court of Appeal, the Supreme Court held that the claim could be heard in England on two grounds:

there was a case to be tried; and the UK was the most convenient forum to try this case. First, Justice Briggs found that "the Chandler indicia are no more than particular examples of circumstances in which a duty...

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