Environmental Claims Against UK Parent Companies: Emerging Trends And The Court Of Appeal Ruling In The Fund'o Dam Class Action

• Jurisdiction: European Union
• Law Firm: Milbank LLP
• Subject Matter: Environment, Litigation, Mediation & Arbitration, Environmental Law, Arbitration & Dispute Resolution, Class Actions, Trials & Appeals & Compensation
• Author: Mr William Charles, Mark Padley and Roza Vanian
• Published date: 08 February 2023

A number of significant and recent decisions in the English courts highlight the developing trend for environmental claims, or claims engaging a broader range of ESG issues, against UK parent companies on the basis of alleged acts or omissions by overseas subsidiaries. With some exceptions, the English courts have been reluctant to dispose of these claims at an early stage in the proceedings. In particular, following jurisdiction challenges, the Supreme Court has found it at least arguable that UK parent companies owed a common law duty of care and/or a statutory duty to the claimants for environmental damage allegedly caused by overseas subsidiaries.

Most recently, the Court of Appeal ("CoA") held that a claim commenced by Municipio de Mariana (a municipal authority in Brazil) and 202,599 other claimants in relation to the 2015 collapse of the Fund'o Dam in Brazil (the "Fund'o Claim") can proceed in the English courts. In particular, the CoA held that it should not be struck out as an abuse of process, or stayed in favour of proceedings already underway in Brazil, thereby overturning the judgment of the High Court ("HC").¹ That decision is subject to an application for permission to appeal to the Supreme Court, but in the meantime an eight-week trial of liability issues in the Fund'o Claim has been fixed for April 2024, following a hearing in the High Court in December 2022.

In this article we first explore some of the key recent decisions, before discussing the Fund'o Claim and its implications in more detail.

Overview of key decisions

The CoA's judgment in the Fund'o Claim (the "Appeal Judgment") is an important decision in a recent line of cases commenced in the English courts seeking redress for the actions of overseas subsidiaries that allegedly caused environmental damage in developing countries. Such cases generally rely on establishing that a duty of care (generally in tort, but potentially also as a result of statute) is owed by the parent company to the claimants, such that the parent is said to be liable for the damage caused by their subsidiaries.

For example, in Vedanta Resources Plc and anor v Lungowe & Ors² the claimants sought damages from Vedanta (the UK-domiciled parent company) for environmental damage to farmland in Zambia allegedly caused by Vedanta's Zambian subsidiary, KCM. In determining the jurisdiction challenge brought by Vedanta, the Supreme Court decided in 2019 that it was at least arguable that Vedanta owed a common law...