Commentary on Lungowe and others v Vedanta Resources plc and Kokola Copper Mines plc [2019] UKSC 201
The need to secure individual human rights from corporate malpractice is of increasing importance in recent years in light of industrial incidents causing considerable injury to individuals and damage to properties and the environment.2 The UK Supreme Court’s recent decision in Lungowe v Vedanta Resources plc and Kokola Copper Mines plc,3 commented as “the most important judicial decision in the field of business and human rights since the jurisdictional ruling of the United States Supreme Court in Kiobel v Royal Dutch Petroleum in 2013,”4 is the latest entry on the English jurisprudence on the protection of human rights against corporate abuses and malpractices. Although formally a jurisdictional ruling, it has provided important insights on how English courts will assess whether a defendant corporation(s) has breached its duty of care to the relevant claimants. A duty of care owed by a private company, despite being a private law matter, has considerable implications for the necessary human rights protection that the law should offer in favour of stakeholders affected by corporate malpractices. An example of this would be a fundamental human right to health.5 This article will focus on two issues: (i) the Supreme Court’s (“the Court“) approach to determining the existence of a duty of care owed by a corporation to others and breaches of such duty, and (ii) the approach to determining the proper forum for suing an anchor defendant.6 It argues that the Court’s approach to finding the existence of a duty of care is commendable but potentially analytically confusing. Similarly, concerning the Court’s approach to the determination of the proper forum in the present context, it argues that the Court’s approach improves the ability of the assessment to be tailored closer to the facts, but the cost of less predictable application of the law.
Facts and appellate history
From Chingola in Zambia, 1,826 people claimed that Vedanta Resources plc (“Vedanta plc“) (an English holding company with a small office in London but controlled a huge amount of assets) breached its duty of care to ensure that its Zambian subsidiary (Konkola Copper Mines plc (“KCM plc“); biggest private employer in Zambia but had few assets of its own) would not harm the environment surrounding its mining sites and local communities. The claimants claimed compensation for personal injury, property damage, loss of income, amenity and enjoyment of land because of discharges from copper mines. In response, Vedanta plc and KCM plc argued that the English courts did not have jurisdiction to hear the claim and the proceedings should be stayed on forum non conveniens grounds. At the first instance,7 Coulson J granted jurisdiction over the claims and held that the case could not be fairly pursued in Zambia.
At the Court of Appeal,8 Simon LJ (with whom Jackson LJ and Asplin LJ agreed with) confirmed that the foreign citizens may pursue legal claims in England against English-based multinational companies for their overseas activities. On the claims, Simon LJ summarised the following principles at [83] about the determination of the existence of a duty of care owed by a parent company of a multinational corporation:-
● The starting point is the three-part test of foreseeability, proximity, and reasonableness from the seminal tort case of Caparo Industries plc v Dickman.9
● A duty of care may be owed by a parent company to an employee of a subsidiary, or a party directly affected by the operations of that subsidiary. Such duty of care may arise where the company (a) has taken direct responsibility for devising a material health and safety policy the adequacy of which is the subject of the claim, or (b) controls the operations which give rise to the claim.
Simon LJ also held that England and Wales was the proper place to bring trial, and defended Coulson J’s decision as he was “entitled to view that it was inappropriate for the litigation to be conducted in parallel proceedings involving identical or virtually identical facts, witnesses and documents, in circumstances where the claim against Vedanta would in any event continue in England.”10 Considerable emphasis was laid on a need to avoid similar proceedings in two jurisdictions. He further noted that if the claimants litigated against KCM plc in Zambia, they would not obtain justice for a number of reasons: (i) they would not be able to afford the cost of any legal representation even with their low levels of earnings in the first place,11 (ii) Condition Fee Agreements are unlawful in Zambia and thus the claimants could not avail of it,12 (iii) there was no prospect for the claimants to obtain legal aid,13 (iv) prospect of ad hoc funding was unrealistic,14 (v) no private lawyers with relevant experience were willing and capable of taking on such claims in Zambia,15 (vi) previous environmental litigations in Zambia had failed for various reasons,16 and (vii) KCM plc was likely to adopt an obdurate approach to litigation in Zambia thus resulting in an enormous increase of time and cost.17
The appeal to the Supreme Court raised three questions on jurisdiction, two of which are relevant to the discussion on the Court’s approach to jurisdiction and forum non conveniens: (i) whether England and Wales was the proper place to bring the claims, and (ii) even if Zambia would otherwise be the proper place, whether there was a real risk that the claimants would not obtain access to substantial justice in Zambia.
Lord Briggs’s contextualised approaches
Parent company’s duty of care
Holding that ownership of a subsidiary company by a parent company does not impose a duty to take control of the management of the operations or business owned by the subsidiary, Lord Briggs noted that “everything depends on the extent to which, and the way in which, the parent availed himself of the opportunity to take over, intervene in, control, supervise or advise the management of the relevant operations … of the subsidiary.”18 The intervention of the English-domiciled parent companies in the management of subsidiaries’ operations and their human rights and environmental performance may give rise to a duty of care to third parties, for example local communities. The human rights of such third parties is thus indirectly protected by prudent, or at least well-planned, corporate practices. Instead of focusing only on the subsidiary company itself, both the parent and subsidiary companies will be required to contribute to prudent corporate practices and mitigate the detrimental impacts of corporate practices on e.g. local communities. The duty is, moreover, not merely limited to health and safety issues. Moving on, Lord Briggs also refused to compartmentalise and categorise the cases and scenarios under which a parent company would be liable. In light of the lack of any limitations to models of management, Lord Briggs was “reluctant to seek to shoehorn all cases of the parent’s liability into specific categories of that kind, helpful though they will no doubt be for the purposes of analysis.”19
Lord Briggs argued that the existence of group-wide policies and guidelines per se and the parent’s expectation on the subsidiary to comply with them is not sufficient for finding a duty of care. It is necessary for the parent company, instead of merely proclaiming such policies, to “take active steps, by training, supervision and enforcement, to see that they are implemented by relevant subsidiaries.”20 Alternatively, a parent company may incur a duty of care to a third party if, in its published materials, “[the company] holds itself out as exercising that degree of supervision and control of its subsidiaries, even if it does not in fact do so.”21 In such circumstances, the parent company’s omission from acting may constitute an abdication of the responsibility which it has publicly undertaken. The published materials of Vedanta plc was held to show that the company had “asserted its own assumption of responsibility for the maintenance of proper standards of environmental control over the activities of the subsidiaries, and in particular the operations of the Mine … to show that it is well arguable that a sufficient level of intervention by Vedanta in the conduct of operations at the Mine may be demonstrable at trial…”22
Forum non conveniens and proper place for trial
For the Respondents to persuade the Court to decline jurisdiction on the basis of forum non conveniens, two requirements must be satisfied:23 (i) they need to show that the foreign forum is “clearly more appropriate,” and (ii) “substantial justice” will be done at the foreign form — stay of proceedings will not be granted in favour of the defendant if “substantial justice” will not be done at the foreign forum. Firstly, under (i), in contrast to Coulson J’s and Simon LJ’s analysis based on the need to avoid parallel proceedings and judgements, Lord Briggs argued that the purpose of avoiding irreconcilable judgements should be balanced against other connecting factors which link the case with the foreign forum. As Vedanta plc had consented to submit to the jurisdiction of Zambian courts, the choice of the forum of litigation now enjoyed by the claimants renders the possibility of irreconcilable judgements no longer a decisive or conclusive answer to the question of the appropriateness of forum.24 This is because it becomes possible for both parties to agree to litigate in Zambian courts. Coulson J’s determination on this point is thus an error of principle.25 Lord Briggs then moved on to note that, while the risk of irreconcilable judgements was a relevant factor and contoured against holding Zambia as the proper forum, the other connecting factors in the present case showed that Zambia was “the overwhelmingly the proper place for the claim to be tried.”26 In such an assessment, “it is sensible to stand back and look at the matter in the round.”27
Moving on to the second limb of the forum non conveniens test, for the court to exercise discretion and permit English proceedings, it is necessary to satisfy the court “…by cogent evidence … there is a real risk that substantial justice will not be obtainable in that foreign jurisdiction.”28 Lord Briggs found in favour of the claimant that substantial justice will not be done if the claim was pursued in Zambia, the key issue being the lack of funding. While there existed various forms of funding, it was found that “most were unavailable but that the one which was in principle available would not attract a legal team which was both prepared to act, and able to do so with the requisite resources and experience.”29 The need for expert evidence and work in the present case, from the legal team representing the claimants, be “paid for as disbursements, but it will still need to be supervised by competent and experienced lawyers.”30 The “unavoidable scale and complexity of this case (wherever litigated)”31 has led the judge to conclude, correctly in Lord Briggs’s opinion, that in light of the limited funding and legal resources available within Zambia, substantial justice could not be achieved in Zambian courts.
Implications of Lungowe and future developments
Parent company liabilities
To begin with, Lord Briggs’s judgement of the existence of a duty of care owed by parent companies is an important step towards enhancing corporate accountability for human rights violations. The contextualised approach at [49] focusing on the extent of intervention by the parent company into the subsidiary’s operations allow for a more accurate assessment of the actual scope of liability that should be borne by the parent. This is because the “human rights” under consideration in the present case are likely to be, in contrast to the fundamental rights found in the e.g. the European Convention on Human Rights,32 of a socio-economic character. An example mentioned at the start of this article is a right to health under Article 12 of the International Convention on Economics, Social and Cultural Rights. This would be particularly important for countries like Zambia, a third-world country in a developing status and the nation’s social-economic infrastructure and rights protection are not as robust as first-world countries. Instead of imposing any direct judicial standards on the requisite standard of duty of care to be satisfied, Lord Briggs’s judgement has struck a delicate balance between the need to maintain (i) the need for autonomy and flexibility in corporate practices and (ii) the need for judicial oversight in monitoring multinational companies and their practices, in particular the subsidiaries, in less-developed countries across the globe.
Another point to note is the open-ended nature of the scope of liability borne by parent companies. It should be seen as an improvement from the seminal Court of Appeal case of Chandler v Cape plc in 2012.33 In Chandler, Arden LJ laid down four requirements to be satisfied in order for the court to impose on a parent company responsibility for the health and safety of its subsidiary’s employees.34 Arden LJ’s approach was more restrictive than Lord Briggs’s formulation for two reasons. Firstly, the Chandler duty of care only focused on the health and safety policies of the subsidiary company, instead of the general management of the “relevant operations” of the subsidiary. Lord Briggs’s formulation allows for a more expansive range of policies and practices to be covered in assessing whether the parent company should be adjudged to owe a duty of care to the relevant parties. The court enjoys a “broad supervisory spectrum”35 in monitoring the policies and practices of the multinational corporation, based on the instructions of the parent company, as a whole. Secondly, and more importantly, Lord Briggs’s approach is not limited to the employees of the subsidiary company, but may include third parties affected by the corporation’s operation, for example local communities. This expands the scope of accountability of the parent company, thus encouraging them to be more mindful of the possible consequences and implications of their practices on potential stakeholders related or relevant to its business operations.
As a matter of legal analysis, Lord Briggs’s judgement can be seen as a scale for determining whether a parent company should be held to have owed a duty of care to the relevant stakeholders, and thus whether it has breached its duty of care (as adjudged to have existed). This scale is based on the extent of participation and intervention into the subsidiary’s operations. This, however, gives rise to the possible scenario and incentive of a hands-off parent company permitting its subsidiary to commit human rights abuses for business purposes,36 yet to be adjudged to have not intervened sufficiently into the subsidiary’s operations and thus cannot be said to have owed any duty of care. Robert McCorquodale observes that this would undermine developments in human rights due diligence on the part of multinational corporations.37 Omission on the part of the parent company may, therefore, not be seen as a breach of duty of care (since there could not be any duty of care in the first place). This is particularly problematic for vulnerable third parties, for example local communities, that do not have adequate resources to protect their neighbourhood and natural resources from being damaged by the business operations of subsidiaries of multinational corporations.
A possible remedy for this loophole may be found in the requirements offered by Arden LJ in Chandler. It is worthy to note that Arden LJ formulated the parent company’s involvement in the subsidiary’s business operations as “has or ought to have.”38 The “ought” part of the formulation is illuminating, as it allows the court to escape the analytical loophole mentioned in the foregoing paragraph and hold that the parent should have intervened in the first place. Instead of focusing on what the parent company has done or offered to do, the incorporation of Arden LJ’s analysis in Lord Briggs’s formulation could allow a court to find what the parent company should have done. This would also fit in nicely with Lord Briggs’s refusal to compartmentalise cases of parent’s liability at [50], as a type of case in which the parent should have asserted responsibility but nevertheless failed to. Alternatively, considerations over what the parent company should have done may be seen as an example of being “reasonable” to hold the company to have owed a duty of care under the Caparo test. Under Lords Brigg’s emphasis on the general management and operations of the subsidiary company, this may suggest that liability for omissions may encompass the parent company’s inaction in terms of ensuring that the subsidiary’s relevant management and operations would not be contrary to the human rights interests of stakeholders, in particular local communities and vulnerable individuals.
Forum non conveniens and proper place for trial
The continued application of the two-part test of forum non conveniens protects the legal and analytical certainty needed for such analysis. Such certainty is particularly crucial in the present context as it carries considerable implications on the proper role of a domestic court in deciding whether to intervene into a case which may be more appropriately held in a foreign court. The most important change brought by Lord Briggs’s judgement, it is submitted, is the diminished importance of the policy of avoiding parallel proceedings as a factor in determining the appropriate place for a trial involving an anchor defendant. On this point, Ekaterina Aristova argues that the policy of avoiding parallel proceedings had more force in the jurisdictional analysis of the judgement than the existence of any territorial connections between England and claims against the foreign subsidiary.39 What was not resolved in Lord Briggs’s judgement is, however, the actual importance and position of the factor of (risk of) irreconcilable judgements in the first limb of the forum non conveniens test (the “clearly more appropriate” component). This is because, despite connecting factors now being given primary (or at least increased) importance in the first limb of the test, it is unclear the extent to which the need to avoid parallel proceedings should be given weight. Given such an important change in the method of determining proper forum, Lord Briggs could have clarified the analytical flow in determining whether an English court is the proper forum for hearing cases like Lungowe.
The identification of proper forum also raises concerns about the future of litigating negligence claims against English-domiciled parent companies in English courts. Following Lungowe, English courts will not treat jurisdictional rules as decisive of the question of proper forum, but will focus more on the balance of connecting factors to determine where the proper forum for litigating claims against the foreign subsidiary is. This takes place in the final step of the forum non conveniens test – only after having determined that the impugned foreign court is the appropriate forum for the trial. The outcome of the forum non conveniens inquiry will now be dependent on the achievement of substantial justice in the foreign court.40 It must not be ignored, however, that “substantial justice” was not given a comprehensive elaboration in terms of the possible scope of considerations that can arise under it. Putting such criticism to its strongest, “substantial justice” may be interpreted as a wild card for the court to grant English proceedings in order to allow claimants to avail themselves of the comprehensive English tort rules in pursuing claims against multinational corporations. That being said, it is submitted that Lord Briggs’s analysis is unlikely to be interpreted as such. This is because his analysis is, appropriately, focused on the need to ensure access to justice for the disadvantaged claimants. Given access to justice (in particular, right of access to courts) has always been one of the rights most cherished by English courts in common law,41 Lord Briggs’s focus on access to justice is a prudent formulation of what “substantial justice” should entail. The key should always be on the possibility of access to justice and allowing claimants to have their claims properly heard and assessed.
Conclusion
The need to protect the human rights of stakeholders in the context of the business operations of multinational corporations presents a delicate challenge for the courts. Tasked with balancing the need for robust human rights protection and restraint from excessive judicial intervention in corporate practices and possible hearings in foreign forums, Lungowe has struck a commendable balance between the two. It has also presented a breath of fresh air on important questions of corporate accountability in private law, which has considerable implications on human rights protection indirectly offered by the court. Although a full assessment of Lord Briggs’s judgement cannot be conducted in the limited space of this commentary, it is clear that it represents an important step in enhancing human rights protection for stakeholders in business operations of multinational corporations across an increasingly globalised business environment.
[1] Many thanks to Steve Lee (LLB ’19, PCLL ’20 HKU) for his comments on an earlier draft. All errors remain on the author’s own.
[2] For example, see ONCA Das v George Weston Limited and others (2018) ONCA 1053 (Ontario Court of Appeal) and Okpabi and others v Royal Dutch Shell [2018] EWCA Civ 191 (English Court of Appeal).
[3] [2019] UKSC 20.
[4] Doug Cassel, “Vedanta v Lungowe Symposium: Beyond Vedanta – Reconciling Tort Law with International Human Rights Norms” (OpinioJuris, 19th April 2019) (http://opiniojuris.org/2019/04/19/vedanta-v-lungowe-symposium-beyond-vedanta-reconciling-tort-law-with-international-human-rights-norms%EF%BB%BF/) (Accessed 26th August 2019).
[5] Article 12, International Covenant on Social, Economics and Cultural Rights.
[6] An anchor defendant in a litigation against a multinational corporation with subsidiaries in foreign countries refers to the defendant, usually the foreign subsidiary, that in order to sue the subsidiary, the parent company must be sued first. The key is whether the foreign company is a “necessary and proper party” (Civil Procedure Rules Practice Direction 6B Rule 3.1(3)) to the litigation in a suit against a domestic defendant.
[7] [2016] EWHC 975.
[8] [2017] EWCA Civ 1528.
[9] [1990] UKHL 2.
[10] (n 8) [117].
[11] ibid [124].
[12] ibid [125].
[13] ibid [126].
[14] ibid [127].
[15] ibid [128].
[16] ibid [129].
[17] ibid [130].
[18] (n 3) [49].
[19] ibid [51].
[20] ibid [53].
[21] ibid.
[22] ibid [61].
[23] This follows from the European Court of Justice’s (“ECJ“) decision in C-281/02 Owusu v Jackson [2005]. In Owusu, the ECJ held that contrary to earlier English jurisprudence, Article 4.1 of the Recast Brussels Regulation conferred a right on any claimant (regardless of domicile) to sue an English domiciled defendant in England, free from jurisdictional challenge on forum non conveniens grounds, even where the competing candidates for jurisdiction were England (part of a member state) and some other non-member state.
[24] (n 3) [75].
[25] ibid [84].
[26] ibid [85].
[27] ibid [87].
[28] ibid [88].
[29] ibid [93].
[30] ibid [94].
[31] ibid [95].
[32] This refers to the rights under Articles 2-14 of the Convention.
[33] [2012] EWCA Civ 525.
[34] ibid [80].
[35] (n 4).
[36] (n 4).
[37] Robert McCorquodale, “Vedanta v Lungowe Symposium: Duty of Care of Parent Companies” (OpinioJuris, 18th April 2019) (http://opiniojuris.org/2019/04/18/symposium-duty-of-care-of-parent-companies/) (Accessed 1st September 2019).
[38] For example, the second requirement of Chandler is that “The parent either has or ought to have some knowledge about health and safety issues in respect of the subsidiary’s business” (at [80]).
[39] Ekaterina Aristova, “UK Supreme Court decision in Vedanta: Finding a proper balance between Brussels I and the English common law rules of jurisdiction” (Conflictoflaws.net, 24th April 2019) (http://conflictoflaws.net/2019/uk-supreme-court-decision-in-vedanta-finding-a-proper-balance-between-brussels-i-and-the-english-common-law-rules-of-jurisdiction/) (Accessed 1st September 2019).
[40] In Lungowe, the “substantial justice” issue is phrased by Coulson J (approved by Lord Briggs) as a matter of “access to justice” ([2019] UKSC 20, at [89]).
[41] On the importance of justice concerns for courts, see Richard Clayton, “The Empire Strikes Back: Common Law Rights and the Human Rights Act” [2015] (1) Public Law 3-12.
Thomas Yeon
LLB (Durham) ’18, LLM (LSE) ’19, PCLL (HKU)’20 and Public Law Notes Editor of the LSE Law Review Summer Board 2019