22 Jan The UK Supreme Court considers whether parent company Vedanta has a duty of care and so may be held legally responsible for the harm caused by its Zambian subsidiary
[Carlos Lopez is a Senior Legal Adviser at the International Commission of Jurists and Marilyn Croser is the Director of CORE Coalition UK.]
The United Kingdom Supreme Court is presently considering an interlocutory appeal by the company Vedanta Resources and its Zambian subsidiary KCM challenging a Court of Appeal decision to uphold jurisdiction of UK courts in the case and allow the plaintiffs, some 1800 Zambian villagers to pursue their case against both companies in the United Kingdom. A contention in the appeal concerns jurisdiction and whether the England and Wales court is the proper forum, assorted with issues on forum non conveniens and access to justice in Zambia and in the UK. Yet the Court also must resolve the crucial issue of whether the claimants have real prospects to establish that Vedanta as a parent company arguably does owe a duty of care to third parties, in this case the villagers living in the vicinity of its Zambian subsidiary. If so, this would go some way to establishing the decisive question as to whether the claim has a real prospect (an arguable case) of succeeding or rather bound to fail?
The International Commission of Jurists together with the CORE Coalition are intervening in this appeal.
In 2015 Villagers of Chingola (Zambia) filed a civil suit in the United Kingdom for negligence in tort against Vedanta Resources Plc (Vedanta), a UK incorporated parent company, and Konkola Copper Mines Plc (KCM), its Zambian subsidiary. They claim that Nchanga copper mine – owned and operated by KCM – negligently discharged waste and polluted the local waterways, causing personal injury to the local residents, as well as damage to property and loss of income.
The Court of Appeal’s judgment of 13 October 2017 in Lungowe and Ors. v Vedanta Resources Plc and Konkola Copper Mines Plc  EWCA Civ 1528, dismissed the companies’ objections, giving the go-ahead for the claim to proceed in the courts of England and Wales. Prior to this, in 2015 the High Court had also held that the claimants could bring their case in England and Wales, despite the fact that the harm occurred in Zambia, where both the claimants and KCM – the direct agent causing harm- are domiciled. At all levels, Vedanta and KCM have argued that the courts of England and Wales do not have jurisdiction on a number of grounds, including the lack of an arguable case, and that the appropriate forum is Zambia, the jurisdiction of which Vedanta would agree to submit.
The current appeal before the UK Supreme Court is of great significance beyond the case at issue and its outcome is expected to elaborate on existing law in an area key to the governance of economic globalization. Two similar cases in which lower courts found that there was no arguable case and the claimants had no prospect of success are queuing up in the appeals line to the Supreme Court and their fate largely depends on the outcome of the Vedanta case: AAA v Unilever (2018) EWCA Civ 1532, and Okpabi v Royal Dutch Shell Plc (2018) Bus L.R. 1022. At the core of the resolution of the Vedanta and the other disputes lies the potential of the judiciary in common law countries to creatively and gradually construe the law to respond to novel situations without the need to have recourse to new legislation, provided that they can build on well-established principles.
The plaintiffs and interveners are hopeful that the Justices of the UK Supreme Court will be prepared to accept the incremental development of the common law in this area. As interveners International Commission of Jurists and CORE Coalition remarked in our written submission: “ the characteristic approach of the common law… is to develop incrementally and by analogy with established authority” (citing Robinson v Chief Constable of West Yorkshire Police (2018) UKSC 4 (2018) 2 WLR 595). Already in the Court of Appeal’s decision on the case, responding to Vedanta’s submission that there was no prior authority for the argued widening of the duty of care, Simon LJ stated: “That may be true, but it does not render such a claim unarguable. If it were otherwise the law would never change”.
This being the case and expectation, let’s turn to key issues debated before the UK Court.
A novel duty of care or the application of old principles to novel situations?
The issue of legal principle at the core of this and similar cases is whether a parent company such as Vedanta owes a duty towards the people living in the vicinity of its Zambian subsidiary. This is about the responsibility of one company towards third persons who are neither its employees nor its own immediate neighbours. The clarification of this principle clearly concerns hundreds or even thousands of situations where multinational enterprises organize their business through a web of subsidiaries, in particular in the mining, oil and gas sectors.
At the Supreme Court, Vedanta and KCM argued that the imposition of a duty of care on Vedanta to prevent its subsidiary from harming villagers would amount to a positive duty to interfere with its subsidiaries’ affairs to ensure the adoption of policies and means for their implementation, a novel duty of care of proportions not present in common law. Before the court imposes such a duty of care, Vedanta argues it should first carry out a proper analysis of the facts, which it claims the Court of Appeal failed to do.
In response to the Appellants, claimants argued that this duty of care is not novel, but rather that it is the application of well-established principles to a fresh type of situation. Further engaging in examination of the facts would entail a “mini trial” that the court may not be able to carry out nor would it be fair for the claimants in the circumstances. Claimants summarized their position by stating that this claim concerns the application of “orthodox principles of common law negligence to the specific circumstances” of the case. This orthodox principle was defined as:
“…a legal person can in certain circumstances owe a duty of care to a person to protect them from the risk of injury from others even though they may not have a direct relationship with the person to whom the duty if owed (such as one governed by a contract of employment)” (at 106 Respondents submission)
In support, Claimants cite a series of decisions in the courts of England and Wales, including the now famous Chandler v Cape plc (2012) 1 WLR 3111. Interveners International Commission of Jurists and CORE invoked comparative jurisprudence from Canada and the Netherlands, in support of this point, in addition to a series of emerging international standards that point to the need to establish parent company responsibility.
Interveners also considered the possibility that the Supreme Court could decide that the duty of care pleaded by Claimants would impose a novel type of duty on companies such as Vedanta. In this scenario the Court may decide whether imposition or extension of a duty of care is “fair, just and reasonable” (criteria established in previous jurisprudence) having regard also to the international standards in the field. The interveners argued that these standards establish important policy objectives adopted by the Government of the United Kingdom, the application of which the Court may consider it has a duty to contribute or at least not frustrate.
The circumstances of the case and Vedanta’s control of the relevant KCM operations
The claimants argue that their case is about the application of existing principles to their specific circumstances. Given there does not appear to have been an earlier instance of judicial decision in the UK formulating such principle, the Court may proceed by analogy with other decisions. The imposition of a duty of care on Vedanta would depend largely on the facts of the case. The Claimants offered an extensive exposition of how such facts demonstrate a degree of control and direction by Vedanta of KCM’s operations, its health, safety and environmental practices, and Vedanta’s knowledge about the dangerous nature of KCM’s activities.
A key issue in the discussion is whether Vedanta -said to have only some 19 administrative employees in the UK- could have actual control of the KCM operations that caused the harm. Vedanta argues it could not possibly have control and that its employees in London were dedicated to performing duties related to compliance with listing and other regulatory requirements. While Vedanta has a group-level health and safety policy, the definition of specific policies on health and safety and their application was left to each member of the corporate group. The complainants, however, argue powerfully that the evidence points to effective control. Not only do Vedanta’s policy statements include the whole group of companies, but KCM’s has also made admissions of contracts and payments to Vedanta for specific management services. The argument that a few Vedanta staff cannot control KCM’s operations does not stand scrutiny. As interveners pointed out by reference to Vedanta’s sustainable development agenda, including the UN Global Compact and IFC standards,
“Vedanta presumably does not contend that it gives effect to its “sustainable development agenda” directly through the work of the small staff that it employs to attend to “regulatory and listing obligations”. Rather, when Vedanta says that it pursues a “sustainable development agenda”, this reflects that it does so through its subsidiaries: Vedanta is able to do so because it has control over its subsidiaries, and is responsible for monitoring and directing them” (at 21) (footnotes omitted)
Where to now?
Vedanta’s written pleadings- reiterated at the hearing- emphasized that no previous judgment provides a precedent for this case, or recognizes the same duty of care. This is a novel duty, based on novel principles which if adopted would give rise to a far reaching and unprecedented duty on multinationals. Counsel implied that this would be a matter proper for Parliament.
Lord Justice Wilson, interjecting during Vedanta’s oral argument referred to the interveners’ submission, noting that it “set out the general direction of travel” toward recognizing claims of this nature at an international and comparative level. He referred to General Comment 24 of the UN Committee on Economic, Social and Cultural Rights (para 24) which notes various obligations of States Parties to the Covenant on Economic, Social and Cultural Rights, including: to remove substantive, procedural and practical barriers to remedies, including by establishing parent company or group liability regimes. He then asked “as an organ of the state, is the court not obliged to consider these matters in deciding how far the law should go?” Although Vedanta’s counsel the following day refuted a legal obligation on the court to give effect to UN Committee interpretations, the fact of the matter is that the interpretations of Treaty Bodies of the obligations under the respective treaties are seen as authoritative interpretation of the scope States parties’ obligations.
Defendant companies’ arguments that the principle is one of total novelty seem little more persuasive than their policy considerations regarding the opening of “floodgates” to an infinite number of suits in UK courts or the alleged creation of an open liability to an indeterminate number of people. Both policy arguments were amply answered in Claimants’ pleadings by reference to sound legal principles and reasoning. For instance, in relation to the “floodgates” argument, they referred to Lord Nicholls in Malik v Bank of Credit and Commerce International S.A (1998) AC 20: “it could not be right to allow ‘floodgates’ arguments of this nature to stand in the way of claims which, as a matter of ordinary legal principle, are well founded”, and Audl LJ in Three Rivers District Council v Governor and Company of the Bank f England (N0. 3) (2000) 2 WLR 15: “Nor should the court be deterred by ‘floodgates’ arguments in this age of environmental and product liability”.
It remains to be seen whether the Supreme Court indicates that it is prepared to develop incrementally the law and expand the scope of a potential duty of care of parent companies to communities neighbouring their subsidiaries’ operations. Should it be so inclined, this would mean a major change for multinationals globally because the ruling of the UK Supreme Court will likely have an impact on common law and other jurisdictions prepared to give careful consideration to the evolved legal principles.