Background
On 15–16 of January 2019, the UK Supreme Court heard an appeal in the case of Vedanta Resources PLC and another v Lungowe and others. The case dates back to September 2015, when approximately 2,000 Zambian villagers brought a negligence claim against Vedanta Resources Plc (Vedanta) and its subsidiary, Konkola Copper Mines Plc (KCM), in England. The villagers (claimants) allege that they suffered loss of income and personal injury from the toxic effluence released into the Kafue River by KCM. KCM operates a copper mine in Zambia and Vedanta was domiciled in England at the time.
High Court of England and Wales and Court of Appeal
The claimants sought to sue Vedanta and KCM in the High Court of England and Wales, based on European Union law. EU law provides that a company domiciled in an EU Member State shall be sued in the courts of that state. Jurisdiction of the High Court was accepted and a claim was brought against Vedanta and KCM. However, Vedanta and KCM (the defendants) brought an interlocutory appeal to the High Court to dismiss the case. An interlocutory appeal seeks to have a ruling or decision by the trial judge reviewed by the Court, in this case, accepting the jurisdiction of the High Court of England and Wales to try the matter.
The defendants argued that:
- Zambia, not England, was the proper jurisdiction for the claim;
- that there was no ‘real issue’ between Vedanta and the claimants, as all the events took place in Zambia; and
- that they were not a ‘proper party’ to the claim, as they did not have operational control over KCM, specifically over the health and environmental standards and policies of the Zambian mine.
Further, they argued that if there was no ‘real issue’ between Vedanta and the claimants, then KCM was not a ‘proper party’ to the claim in England and therefore the case should not be heard in England.
The claimants relied on EU law whereby EU Member States must exercise jurisdiction over EU-domiciled companies, regardless of the domicile of the claimant. The claimants also argued that there was a risk to obtaining justice in Zambia, because of corruption, lack of legal expertise and the cost of litigating environmental cases.
The High Court made two important rulings. First, it established that it is possible to argue that a parent company can be held liable for harm caused to third parties resulting from the actions of their subsidiaries. Secondly, Vedanta and KCM, the non-EU subsidiary, could be sued in English courts. Although the events that caused harm to the Zambian villagers occurred in Zambia, the Court accepted that, in the interest of preventing separate trials in Zambia and England on the same facts, and the difficulty in obtaining justice in Zambia, England remained the appropriate forum. Accordingly, KCM and Vedanta were both proper parties to the claim and there was a real issue between the companies and the claimants.
Following the High Court decision, KCM and Vedanta appealed to the Court of Appeal in July 2017. The Court dismissed the appeal, stating that a duty of care arises if the parent company ‘has taken direct responsibility for devising a material health and safety policy the adequacy of which is the subject of the claim’ or ‘controls the operations which give rise to the claim’. The Court of Appeal agreed with the High Court that there was sufficient evidence to support the assertion that Vedanta exercised control over KCM.
This decision contrasted with two other similar cases, Okpabi and others v Royal Dutch Shell Plc and another and AAA and others v Unilever Plc and another, where the Court of Appeal denied jurisdiction due to lack of sufficient evidence of subsidiary control by the parent company. These two decisions are the subject of appeal to the Supreme Court.
Supreme Court of the United Kingdom
KCM and Vedanta further appealed the case to the Supreme Court. This was the appeal heard on the 15–16 January 2019, more than four years since the villagers first brought the case before the English courts. The Supreme Court considered four main issues on appeal:
- the proper approach to the ‘real issue’/‘proper party’ test;
- the exercise of discretion in claims against foreign companies;
- access to justice in Zambia; and
- the application of EU law regarding EU-domiciled companies.
The appellants, Vedanta and KCM, repeated many of the same arguments. Their main contention remained that Vedanta did not exercise enough control over the health and environmental policies of KCM to be held liable for any harm caused to the Zambian villagers. This meant that England was not the proper jurisdiction to bring a claim, as Vedanta did not owe a legal duty to the villagers.
Accordingly, the Court should dismiss the case against Vedanta and KCM and the villagers should instead pursue their claims in Zambia. The defendants argued that the courts retained some discretion in terms of EU and English law and that English courts did not have to exercise their jurisdiction over Vedanta. Further, they argued that justice could be obtained in Zambia, contrary to what the High Court and Court of Appeals determined, suggesting that Zambia remained the proper place to sue KCM.
The respondents, however, argued that:
• EU law was mandatory and the Court had no discretion regarding its jurisdiction over the claim against Vedanta; • the environmental health and safety polices and reports of Vedanta demonstrated an adequate level of control over KCM; • KCM was a necessary and proper party to the claim as any trial against Vedanta would require the same evidence as that against KCM; and • there was a clear risk in accessing justice in Zambia because of the lack of funding and the associated costs of this type of litigation.
Interveners in the case, the International Commission of Jurists and Corporate Responsibility (CORE) Coalition Ltd, provided an opinion that there is growing consensus and developments in international law towards holding corporations accountable for human rights violations, whether perpetrated by a company or its subsidiaries. The interveners relied predominately on the United Nations Guiding Principles on Business and Human Rights, the Ten Principles of the UN Global Compact and the OECD Guidelines for Multinational Enterprises.
The forthcoming decision of the Supreme Court, expected as early as April 2019, holds importance for corporate accountability in relation to human rights violations, particularly for parent companies domiciled in a different jurisdiction to the location of the violation. This decision would make it possible to hold a parent company in the UK responsible for violations under English and EU law. The decision on the mandatory nature of EU law supports the notion that corporations across the EU may be subject to human rights claims, regardless of their corporate structure.
The decision may also offer further support for the growing trend towards accepting claims against holding companies for negligence and human rights violations by their subsidiaries. In New Zealand, a duty of care was found to be arguable in James Hardie Industries Plc v White [2018] NZCA 580 [13 December 2018]. Moreover, in Canada, it was accepted that a duty of care was arguable in both Choc v Hudbay Mineral Inc 2013 ONSC 1414 and Araya v Nevsun Resources Ltd 2017 BCCA 401.
The Vedanta case demonstrates the difficulties, in terms of resources and time, involved in the struggle to hold powerful multinational corporations accountable for human rights violations by the communities in which they operate. The UK’s forthcoming departure from the EU, and in what or any form EU law will continue to apply, causes further uncertainties regarding obtaining justice in the UK for human rights violations committed by UK-domiciled corporations.