EU-based parent companies of foreign subsidiaries now face greater exposure to litigation and liability for for human and environmental rights violations occurring overseas.
In a landmark ruling issued last month, the UK Supreme Court broadened corporate liability and exposure to claims forenvironmental and human rights violations by overseas subsidiaries. Claimants in Vendanta Resources PLC, et al. v Lungowe et al. are poor members of rural farming communities in Chingola District, Zambia. They allege the owners and operators of the Nchanga Copper Mine negligently permitted the release of toxic emissions into the water sources they rely on for drinking and irrigation.
The Nchanga Mine is owned and operated by Konkola Copper Mines plc (KCM), a Zambian company. KCM’s ultimate parent company, Vendanta Resources PLC (Vendanta) is incorporated and domiciled in the United Kingdom.
The Claimants are all citizens of Zambia, andall activities giving rise to the claims occurred in Zambia. Nonetheless, the Claimants brought the lawsuit in the Courts of England on the basis of Vendanta’s status as a UK company.
In upholding the decisions of the High Court and Court of Appeals, the UK Supreme Court found that the parent company demonstrated a degree of control over KCM that created a duty of care sufficient to invoke jurisdiction under EU law. The court also found that, although Zambian courts would be the natural and logical forum for the action, “access to justice” issues (when combined with the duty of care owed by Vendanta), permitted the case to be bought in English courts.
The court also found that the risk of irreconcilable judgments did not preclude English jurisdiction, as KCM was a “necessary and proper party” to resolutions of the claims against Vendanta.
Though procedural rulings on jurisdiction may not seem exciting to non-lawyers, the implications of the decision are truly landmark for EU-based parent companies. Essentially, the actions of subsidiary companies in countries where access to justice barriers exist are sufficient to invoke the jurisdiction of EU courts, even where the parent company exercises only limited levels of supervision and control over the subsidiary.
The Royal Dutch Shell and Unilever, who are facing similar claims of liability based on the actions of their foreign subsidiaries, will undoubtedly be the next two UK companies affected by this decision.
To see the full text of the decision, click here: https://www.supremecourt.uk/cases/docs/uksc-2017-0185-judgment.pdf