Parental Responsibility

Do recent Court of Appeal decisions create a 'Catch 22'?

Since 2017, the Court of Appeal has handed down judgment in three landmark cases, which involve cases brought against English multinationals by victims of human rights impacts, related to the operations of their overseas subsidiaries.

The cases bring in to sharp focus the question of a parent company's liability for the acts and omissions of its subsidiaries. This article considers what this means for English domiciled companies and how they manage human rights related risk throughout their operations.

Three cases

In Vedanta (Lungowe and Ors. v Vedanta PLC and Anor. [2017] EWCA Civ 1528), a group of Zambian farmers brought claims against Vedanta Resources PLC and its Zambian subsidiary in relation to environmental damage allegedly caused by pollution from mines in northern Zambia. The Court of Appeal upheld the High Court's decision to accept jurisdiction, rejecting Vedanta's challenge and finding that there was a real issue to be tried against both parent and subsidiary.

In Shell (Okpabi and Ors. v Royal Dutch Shell PLC and Anor. [2018] EWCA Civ 191) and Unilever (AAA & Ors. v Unilever PLC and Tea Kenya Limited [2018] EWCA Civ 1532), the Court of Appeal reached a different conclusion, rejecting jurisdiction over claims brought by victims of alleged environmental damage in the Niger Delta and post-election violence in Kenya respectively. This was not due to some fundamental disagreement on the law. The Court assessed the cases within the same legal framework, albeit one which affords significant discretion to judges to determine whether or not a duty of care arises on a given set of facts.

The legal framework

Traditionally, English parent companies might have been insulated from liability in cases like Vedanta, Shell and Unilever. Strict adherence to the doctrine of separate legal personality prevented claimants affected by the acts or omissions of a subsidiary from bringing claims against its parent company. Further, an English court would not accept jurisdiction where England was 'forum non-conveniens' - that is, where it considered there to be another, more appropriate country in which the case should be heard.

However, the law has changed and so has the exposure of English parent companies (particularly those with overseas subsidiaries in weak governance zones). For some time, European law has required English courts to accept jurisdiction over an English company, irrespective of...