Duty Of Care – Parent Company Liability For Actions Of Foreign Subsidiaries

There have been a number of cases in which individuals have sought to bring proceedings in tort in England, against an English parent company and its foreign subsidiary, in respect of certain events occurring in the foreign country, where that subsidiary carries out its operations. As Harrison Small discusses, on 10 April 2019, the Supreme Court handed down a much-anticipated judgment, in the case of Lungowe v Vedanta Resources Plc, holding that parent companies domiciled in England can be sued in the English courts for alleged torts committed overseas by their international subsidiaries.

Lungowe v Vedanta Resources Plc

In July 2015, 1,826 Zambian citizens ("Claimants") commenced a claim against two defendants: Konkola Copper Mines PLC ("KCM") and its ultimate parent company, Vedanta Resources PLC ("Vedanta"). The Claimants are poor members of the community who rely heavily on the watercourses for themselves, their livestock and irrigation for farming, and allege that the toxic matter from the mine has been repeatedly discharged and therefore both their health and farming activities have been significantly harmed since approximately 2005.1 The appeal dealt solely with the issue of jurisdiction - that is, the ability of the English courts to hear the claims brought by the Claimants against Vedanta and KCM.

The following four key issues were considered in the judgment:

Would it be an abuse of EU law to permit the Claimants to sue Vedanta, as the anchor defendant? Real issue to be tried against Vedanta: liability as a parent company? Is England the "proper place" to hear the claims? If the English courts do not accept jurisdiction, could the Claimants obtain substantial justice? The key question

The critical question, which will have practical importance to all UK-domiciled organisations that have subsidiary operations overseas, is whether Vedanta sufficiently intervened in the management of the mine, owned by its subsidiary KCM, to have incurred either a common law or statutory duty of care to the Claimants.

The question was a matter of fact, not law.

In this case, Vedanta had, amongst other things, the following:

Sustainability Report - A report produced by Vedanta entitled "Embedding Sustainability", which identified that the oversight of all of Vedanta's subsidiaries rests with the Board of Vedanta. More importantly to the mine and issues identified above facing the Claimants, the report discussed problems with discharges of water and made...