The UK Supreme Court has ruled that litigation relating to pollution in Zambia can be tried in the English courts.
The case heard in April – Vedanta Resources Plc and another v Lungowe and others (2019) UKSC 20 – could have significant repercussions for UK multinational parent companies with subsidiaries in the poorest of countries, whose operations may give rise to environment, health and safety or human rights claims, according to Paul Sheridan, partner and head of environment at London law firm CMS Cameron McKenna Nabarro.
The claimants are a group of Zambian citizens, currently numbering 1,826. Repeated alleged discharges of toxic materials from the Nchanga Copper Mine into local watercourses, which they rely on for drinking water and irrigation, have harmed their health and farming prospects, they claim.
The two corporate defendants are Konkola Copper Mines Plc (KCM) and Vedanta Resources Plc, the latter being the ultimate parent company of KCM, which owns and operates the copper mine.
The Zambian citizens’ claims are pleaded on the grounds of common law negligence and breach of statutory duty, due to the “very high level of control and direction [that it] exercised over the operations of KCM, including its compliance with applicable health, safety and environmental standards”.
Although this judgement relates purely to jurisdiction, commercially it is nonetheless powerful in terms of assessment of liability and – if the claimants succeed – quantum of damages, says Sheridan. The dispute before the Supreme Court was about whether this pollution litigation (if it goes all the way to trial) could be tried in England or be restricted to the courts of Zambia.
KCM and Vedanta have argued that a parent could never incur a duty of care in respect of the activities of a subsidiary simply by putting in place group-wide policies and guidelines and expecting the management of each subsidiary to comply with them. This was dismissed by the Supreme Court, which stated: “If in published materials it [the parent] 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.”
Sheridan issues this warning: “At a time when global environment and human rights-related litigation is rising at an unprecedented rate, it could be easy to think that UK parent companies might be better off refraining from adopting group-wide policies or asserting any control over subsidiaries abroad, or indeed from influencing other third parties such as its overseas supply chains, but that would not be a sensible reading of this case.
“This case is essentially about risk management. It provides a sound reminder that good risk management is an active process that will provide the parent company and subsidiaries with security not only against financial risk but also brand, investment and regulatory risk.”