Vedanta v Lungowe – a road to justice?

The Supreme Court ruled today that 1826 Zambian claimants can bring their claim in England against Vedanta, a UK mining company and KCM, its Zambian subsidiary. The decision came after Vedanta and KCM appealed an earlier decision of the Court Appeal allowing the claimants to bring their claim in English Courts [See my blog on the appeal].

However, today’s judgment must be read carefully as much for what it says as what it doesn’t say.

1) It doesn’t create a separate parent company duty. Instead it reiterates that parent companies can be held liable using the traditional duty of care test as set out in Caparo v Dickman and applied by the Court of Appeal in Chandler v Cape [49] – [50]

2) However, the court has potentially expanded the range of occasions when a parent company could be held liable for devising a group-wide policy. [51] – [54]

[51] … For my part, I would be reluctant to seek to shoehorn all cases of the parent’s liability into specific categories … There is no limit to the models of management and control which may be put in place within a multinational group of companies. At one end, the parent may be no more than a passive investor in separate businesses carried out by its various direct and indirect subsidiaries. At the other extreme, the parent may carry out a thoroughgoing vertical reorganisation of the group’s businesses so that they are, in management terms, carried on as if they were a single commercial undertaking, with boundaries of legal personality and ownership within the group becoming irrelevant, until the onset of insolvency, as happened within the Lehman Brothers group.

[52] …Group guidelines about minimising the environmental impact of inherently dangerous activities, such as mining, may be shown to contain systemic errors which, when implemented as of course by a particular subsidiary, then cause harm to third parties. In the Chandler case, the subsidiary inherited (by taking over a business formerly carried on by the parent) a system for the manufacture of asbestos which created an inherently unsafe system of work for its employees, because it was carried on in factory buildings with open sides, from which harmful asbestos dust could, and did, escape. As a result, and after a full trial, the parent was found to have incurred a duty of care to the employees of its subsidiary, and the result would surely have been the same if the dust had escaped to neighbouring land where third parties worked, lived or enjoyed recreation. It is difficult to see why the parent’s responsibility would have been diminished if the unsafe system of work, namely the manufacture of asbestos in open-sided factories, had formed part of a group-wide policy and had been applied by asbestos manufacturing subsidiaries around the world.

[53] Even where group-wide policies do not of themselves give rise to such a duty of care to third parties, they may do so if the parent does not merely proclaim them, but takes active steps, by training, supervision and enforcement, to see that they are implemented by relevant subsidiaries. Similarly, it seems to me that the parent may incur the relevant responsibility to third parties if, in published materials, it holds itself out as exercising that degree of supervision and control of its subsidiaries, even if it does not in fact do so. In such circumstances its very omission may constitute the abdication of a responsibility which it has publicly undertaken.

3) It is a great day for access to justice! The Supreme Court not only upheld the findings of the High Court and Court of Appeal on access to justice challenges in Zambia [see here for the findings] but also went into detail further analysing Zambian case law on the point. This is of particular importance given the intervention of Zambia’s Attorney General arguing that access to justice was possible in Zambia [92] – [101]

4) The case does not make good reading for the legal profession in Zambia. This is in part due to the lack of funding for group litigation in Zambia but also due to questions around the ability of Zambian lawyers to act in a case of this magnitude with “the requisite degree of competence and efficiency’ [91].

Having said that, the Supreme Court’s decision does not answer the concern raised by the earlier courts that there must come a time when access to justice will not be exported to England. Sadly, nor does it do much for the development of Zambia’s own legal profession and expertise regarding such matters.

5) The Appellants (Vedanta) would have won the appeal had substantial justice been possible in Zambia. This means that a subsidiary accused of the same breaches as Vedanta’s subsidiary but operating in a country with funding and expertise for such claims would not be joined to English proceedings. This would make it difficult to prove breach of duty against the parent company and would risk different judgments in English courts and a third country [102]

6) The Court did not make any reference to the Draft Treaty on Business and Human Rights, the UN Guiding Principles on Business and Human Rights or any other international standards on business and human rights. This makes it difficult to argue that such standards exist on a spectrum tending towards enforceable laws. The implication to be drawn from this could be that national governments are best placed to regulate multinational companies.

Today’s judgment is significant insofar as it opens up the possibility of the Zambian claimants accessing justice. That in itself is an incredible achievement! However, the claimants still face formidable obstacles in respect of proving breach of duty in a case such as this where they will need to meet the three-part test of foreseeability, proximity and fair, just and reasonable. Further, others like them in Zambia will continue to face obstacles to access to justice until the Zambian legal system itself is robust enough to handle such cases.

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