Vedanta Resources Plc & Anor v Lungowe & Ors [2019] UKSC 20: Supreme Court decides Vendanta case on parent company liability for actions of overseas subsidiary can proceed to trial

22 July 2019

On 10 April 2019 the Supreme Court issued its judgment in Lungowe and Ors v Vendanta, ruling that claims brought by a group of Zambian citizens against a Zambian mining company and its UK-domiciled parent can proceed to trial in England. The case raises important issues regarding jurisdiction and the potential liability of parent companies in respect of damage caused by their subsidiaries.

In 2015 1,826 residents of the Zambian city of Chingola filed claims alleging that they have suffered damage as a result of toxic discharges from one of the world’s largest copper mines. The mine is owned and operated by the second defendant, Konkola Copper Mines plc (“KCM”), a Zambian company. The first defendant is KCM’s ultimate parent company, Vedanta Resources plc (“Vedanta”), which is domiciled in England. The claimants allege that both Vedanta and KCM are liable under Zambian law for negligence and breach of statutory duty. Vedanta’s alleged negligence is based on its alleged failure to exercise reasonable care in monitoring and controlling KCM.

The claimants served the proceedings on Vedanta within the jurisdiction, relying on Vedanta’s English domicile and article 4 of the Recast Brussels Regulation. The claimants obtained permission to serve KCM out of the jurisdiction, on the basis that it is a “necessary or proper party” to the proceedings against Vedanta. KCM and Vedanta challenged the jurisdiction of the English courts. In 2016, the High Court held that the claimants could bring their case in England, despite the fact that the alleged tort and harm occurred in Zambia, where both the claimants and KCM are domiciled. This decision was upheld on appeal by the Court of Appeal in October 2017. In April this year, the Supreme Court unanimously dismissed a further appeal by the defendants, upholding the Court of Appeal’s ruling in all but one respect.

The Supreme Court held that the claimants are entitled to rely on article 4 of the Brussels Regulation to establish jurisdiction in respect of Vedanta. In particular, it is not an abuse of EU law, in a case where there is a triable issue against an English company, to state that the English defendant must be sued in its country of domicile (England), even if one of the principal reasons (although not the sole reason) the case is brought against it in England is so that another defendant can be brought into the jurisdiction, using the English defendant as an “anchor”. If, in doing so, the claimants themselves cause a risk of inconsistent judgments, that is a matter for the claimants.

A crucial question to determine was whether Vedanta sufficiently intervened in the management of the Zambian mine to have incurred a common law duty of care to the claimants, or a fault-based liability under the Zambian environmental, mining and public health legislation. The Supreme Court did not accept the general principles of “parent company liability” advanced by either party, but reiterated that each case must be considered on its own facts, which may (or may not) need to be considered at a full trial after disclosure. In this case, the Court considered that Vedanta would arguably owe the claimants a duty of care, on the basis of the principles articulated in Dorset Yacht Co Ltd v Home Office [1970] AC 1004 (and that the breach of statutory duty claims are also arguable).

Although the Supreme Court considered that Zambia would be the proper place for the hearing of the claims (Vedanta having offered to submit to the jurisdiction of the Zambian courts), the Court upheld the Judge’s finding that there was a real risk that the claimants would not be able to obtain substantial justice in Zambia. No criticism was made of the independence or competence of the Zambian judiciary, nor of the civil law procedures in Zambia. Rather, the Court considered a real risk arose because (i) legal aid would not be available, conditional fee agreements are illegal, and the claimants are too poor to fund legal representation; and (ii) Zambia lacks legal teams of sufficient size and experience to pursue mass claims of this nature effectively.

The effect of the judgment is that the claims against both Vedanta and KCM can proceed in England. The judgment potentially has wider implications, given the number of English-domiciled corporations which operate through overseas subsidiaries around the world. In particular, English parent companies who make public commitments relating to their responsibilities to communities and the environment and then fail to put these into practice, may find themselves facing claims brought by non-UK claimants in the English courts.

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Increased Investment in Personal Tax Compliance in the UK (Published in Thought Leaders 4 Private Client)

Advances in technology and increased international fiscal co-operation have made global personal tax compliance initiatives pop up in abundance in recent years. To compound the issue, the Russian invasion of Ukraine and the corresponding economic fallout prompted domestic governments to increase transparency in relation to investments held by wealthy foreign individuals (with a focus on oligarchs).

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It should be noted that a somewhat piecemeal approach, with constant tinkering makes compliance difficult for the taxpayer and is often criticised for lacking the certainty that a stable tax system needs to thrive.

This article was first published with ThoughtLeaders4 Private Client Magazine

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