Editor’s note: Maisie Biggs recently graduated with a MSc in Global Crime, Justice and Security from the University of Edinburgh and holds a LLB from University College London. She is currently an intern with the Doing Business Right project at the Asser Institute in The Hague. She previously worked for International Justice Mission in South Asia and the Centre for Research on Multinational Corporations (SOMO) in Amsterdam.

“No one who comes to these courts asking for justice should come in vain. The right to come here is not confined to Englishmen. It extends to any friendly foreigner. He can seek the aid of our courts if he desires to do so. You may call this ‘forum shopping’ if you please, but if the forum is England, it is a good place to shop in both for the quality of the goods and the speed of service.”

Lord Denning in The Atlantic Star [1973] 1 QB 364 (CA) 381–2

The United Kingdom Supreme Court today has handed down Vedanta Resources PLC and another (Appellants) v Lungowe and others (Respondents) [2019] UKSC 20, a significant judgement concerning parent company liability and the determination of jurisdiction for these claims. Practically, it now means for the first time a UK company will face trial and potentially accountability in their home jurisdiction for environmental harms associated with operations of foreign subsidiaries. 

This is a closely-watched jurisdiction case concerning a UK parent company’s liability arising out of the actions of its foreign subsidiary. The claimants are 1826 Zambian citizens from the Chingola region of the Copperbelt Province. This group action is against UK-domiciled Vedanta Resources PLC and its subsidiary KCM, a second defendant which is incorporated in Zambia. The original claims concern discharges from the KCM-owned Nchanga mine since 2005 which have allegedly caused pollution and environmental damage leading to personal injury, damage to property and loss of income, amenity and enjoyment of land. 

Following the initiation of this claim, in 2015 Vedanta and KCM challenged the jurisdiction of the English courts, however Coulson J dismissed their applications. The Court of Appeal then upheld the dismissal of those applications, so the defendants appealed to the Supreme Court. (See our previous blog on the case here).

The Supreme Court today denied the appeal by Vedanta Resources and KCM, and allowed the claim to proceed to merits in England. The Court made it clear the real risk that the claimants would not obtain access to substantial justice in Zambia was the deciding factor in the case. The Court denied there was an abuse of EU law by the claimants using Vedanta as a jurisdictional hook to sue both the parent company and subsidiary in England, and the claimants succeeded in demonstrating there was a “real triable issue”, nonetheless Zambia was held to be the “proper place” for the case. However, because the Court supported the finding of the first instance judge regarding the risks faced by claimants in accessing substantial justice in Zambia, the appeal was denied, and the case can proceed in England. 

This is a significant judgement, as it now means for the first time a UK company will face trial and potentially accountability in their home jurisdiction for environmental harms associated with operations of foreign subsidiaries. Lord Briggs delivered the judgement on four major issues: the potential for abuse of EU law; whether there was a real triable issue against Vedanta; whether England is the proper place for these proceedings; and whether there was a real risk that substantial justice would not be obtainable in that foreign jurisdiction. 

Why is this significant? For those following this case, and the appeals of Okpabi & Ors v Royal Dutch Shell Plc & Anor (Rev 1) [2018] EWCA Civ 191 and AAA & Ors v Unilever Plc & Anor [2018] EWCA Civ 1532 in the English courts, there are two major findings in this judgement that will likely impact future cases concerning parent company liability. Firstly, the reasoning behind the finding of a “real triable issue” between a foreign claimant and UK parent company, and secondly the primacy the Supreme Court placed on the significance of access to justice as a jurisdictional hook for claims in England.

A. Finding of a “real triable issue” between a foreign claimant and UK parent company

Previous major cases decided in lower courts have fallen at this hurdle. The courts in Okpabi and AAA v Unilever both allowed jurisdictional appeals because they determined there was no real triable issue between the claimants and the UK parent company. In this case, Lord Briggs characterised the test as simply “whether Vedanta sufficiently intervened in the management of the Mine owned by its subsidiary KCM to have incurred, itself (rather than by vicarious liability), a common law duty of care to the claimants [44].”

Four major developments allowed this to happen; firstly, claimants can more heavily rely on the potential of future disclosure of internal defendant documents; secondly, the Chandler criteria ought not to be a ‘straitjacket’ for finding a parent company exercised control; thirdly, that the size of a company’s operation does not dilute a duty of care, and finally that group-wide policies and guidelines alleging group control are potentially sufficient as a basis to argue a triable case of parent company control. Interestingly, all of these points (without explicitly saying so) went against the Court of Appeal’s judgement in Okpabi. 

1. The potential for evidence to emerge upon disclosure

The finding of a “real triable issue” has been a challenge in past cases because particular facts must be determined before the disclosure of the defence’s documents, and there runs a risk of a ‘mini-trial’ ensuing based on limited evidence. This may be of interest to lawyers and courts in other jurisdictions which do not have the same disclosure requirements: the English courts have had to establish how to best ascertain the likelihood of a duty of care based on only publicly-available documents. 

In past, claimants were told they could not base their claim on merely the potential for more evidence to emerge upon disclosure. Lord Justice Simon previously found in Okpabi in the Court of Appeal that “[a]lthough, the claimants make a further point that [the presented evidence] is illustrative of what may emerge on disclosure, the difficulty is that jurisdiction is founded on a properly arguable cause of action and not on what may (or may not) become a properly arguable cause of action [122].” Sir Geoffrey Vos agreed, saying “I might mention in closing that I thought throughout the hearing of the appeal that the court had a responsibility in a case of this kind not to strive to find a reason to allow jurisdiction [208].”

Lord Briggs was very clear on this point: 

“[The question whether the] level of intervention in the management of the Mine [was] requisite to give rise to a duty of care upon Vedanta to persons living, farming and working in the vicinity… is a pure question of fact. I make no apology for having suggested during argument that it is blindingly obvious that the proof of that particular pudding would depend heavily upon the contents of documents internal to each of the defendant companies, and upon correspondence and other documents passing between them, currently unavailable to the claimants, but in due course disclosable [44].”

This confirms Lord Justice Simon’s (interestingly different from his stance in Okpabi) finding when considering this case in the Court of Appeal. He held that at the early stage of a case the unavailability of sufficient evidence ought not be a barrier, rather “much will depend on whether (…) the pleading represents the actuality [83].”

Defendants in these cases have been pushing for the evidentiary bar to be raised, while judges have bemoaned the rising piles of evidence for only preliminary hearings. This decision should lower both the bar and the piles. Section 3 (below) will address the alternative publicly available evidence the courts may now look to.

2. Rejection of a Chandler ‘straitjacket’

Lord Briggs did not take the view that this parent company liability is a novel category of common law negligence liability requiring specific criteria, rather “there is nothing special or conclusive about the bare parent/subsidiary relationship, it is apparent that the general principles which determine whether A owes a duty of care to C in respect of the harmful activities of B are not novel at all [54].” He positively cited Home Office v Dorset Yacht Co Ltd [1970] UKHL 2 as a circumstance in which it had previously been appropriate to find this duty of care. This is a reversal of previous English judgements that have pushed toward more stringent (and difficult to prove without private documentation) criteria for determining a duty of care in these types of cases. 

This case, and Okpabi, AAA v Unilever, and Thompson v The Renwick Group Plc [2014] EWCA Civ 635, all draw from the judgement of Lady Justice Arden in Chandler v Cape Plc [2012] EWCA Civ 525. In this case Arden concluded that there were “appropriate circumstances [80]” in which liability may be imposed on a parent company for a subsidiary's employees’ health and safety. Four of these that were relevant for this case included:

“(1) the businesses of the parent and subsidiary are in a relevant respect the same; (2) the parent has, or ought to have, superior knowledge on some relevant aspect of health and safety in the particular industry; (3) the subsidiary's system of work is unsafe as the parent company knew, or ought to have known; and (4) the parent knew or ought to have foreseen that the subsidiary or its employees would rely on its using that superior knowledge for the employees’ protection. For the purposes of (4) it is not necessary to show that the parent is in the practice of intervening in the health and safety policies of the subsidiary. The court will look at the relationship between the companies more widely. [80]”

She makes it clear however, that this is not a restrictive list. She positively quoted Lord Oliver in Caparo Industries Plc v. Dickman [1990] 2 AC 605:

"'Proximity' is, no doubt a convenient expression so long as it is realised that it is no more than a label which embraces not a definable concept but merely a description of circumstances in which, pragmatically, the courts conclude that a duty of care exists [page 633]."

What had happened however, is that these criteria have hardened throughout Thompson, AAA v Unilever and Okpabi as courts determine how to find evidence of parent company control. Briggs found that one of the few mistakes of the trial judge was “imposing a straitjacket derived from the Chandler case. [60]” Rather, since there is “no limit to the models of management and control which may be put in place within a multinational group of companies… I would be reluctant to seek to shoehorn all cases of the parent’s liability into specific categories of that kind, helpful though they will no doubt often be for the purposes of analysis. [51]” 

As acknowledged by Briggs, analysis and consistency will probably lead to the Chandler criteria (and subsequent iterations) continue to be used as a stepping-off point, however future first-instance judges should no longer view themselves bound to accept these as the only means of determining the likelihood of a duty of care arising. 

3. The size of a company’s operations does not dilute a duty of care

Briggs‘s judgement reflects Sale’s dissent in Okpabi, in which he disagreed that the scale of a company’s operations should necessarily be a factor precluding the finding of control or proximity. Looking by analogy at the Chandler case, Briggs said it was “difficult to see” why making a bad practice part of group-wide policy would diminish the responsibility of a parent “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. [52]”

In Okpabi, while dismissing the claimant’s appeal, Lord Justice Simon endorsed the warning of Justice Cardozo in Ultramares Corpn v Touche (1932) 174 NE 441 against the danger of exposing defendants to “a liability in an indeterminate amount for an indeterminate time to an indeterminate class (p. 44).” According to the first instance judge in the Okpabi case, applying Cardozo’s reasoning meant that the sheer size of Royal Dutch Shell mitigated against finding liability: “In my judgment, that is the antithesis to proximity or neighbourhood. There are 1,366 other companies in the Shell Group, and the service and operating companies amongst that number perform activities in 101 different countries [114].” However, Lord Justice Sales dissented on this point: 

“I do not think that the simple matter of the sheer size of the Shell group can be an answer to the present claim: why should the parent of a large group escape liability just because of the size of the group, if the criteria for imposing a duty of care are satisfied for a number of companies in the group, while the parent of a smaller group (e.g. with one subsidiary) has a duty of care imposed on it when precisely the same criteria are satisfied in relation to its subsidiary? [172]”

This point links with the next concerning how much stock should be placed in publicly accessible group-wide policies and guidelines. 

4. Public-facing group-wide policies and guidelines alleging group control are potentially sufficient as a basis to argue a case of parent company control 

At paragraph [61], Briggs pointed to Vedanta’s published documents concerning their standards of environmental control over the actions of subsidiaries, and how they implemented these standards, as sufficient evidence that a duty of care may be demonstrable at trial.  There has been dissent in past cases regarding the evidentiary importance of public-facing group-wide policies and guidelines, including policies making CSR-style promises of environmental and human rights compliance. 

Lord Briggs firmly rejected the suggestion that there was a general principle that group-wide policies and guidelines would never cause a parent to incur a duty of care in respect of the activities of a particular subsidiary [52]. He gave the example of group guidelines that may contain systemic errors, which in turn cause subsidiaries to cause environmental damage when implemented.

Perhaps the most interesting part of this judgment is the potential Briggs explicitly pointed out of parent companies being held to their public commitments of social and environmental responsibility: 

 “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. [53].”

This is a strong turn away from Lord Justice Simon’s finding in Okpabi, which relegated evidence from this style of public-facing document as only “published for the purpose of informing shareholders and regulators about the Shell Group businesses. Such statements must be read in their proper context [120]… All this is as one might expect of best practices which are shared across a business operating internationally [121],” and so dismissing their evidential value as to finding a duty of care. 

Briggs now has re-defined that ‘proper context’. The implications of this passage for future litigation is potentially massive. Parent companies in many jurisdictions have made soft, PR-friendly commitments to environmental and social standards. On the face of this passage, communities impacted by the subsidiary of a UN Global Compact signatory could potentially sue them for failing to honour the public commitments made to undertake effective due diligence. 

B. Access to justice as the jurisdictional hook

The Court made it clear that the issue of access to justice for the claimants was not due to any deficiencies with the Zambian courts, which the Court considered completely capable of ensuring a just trial and handling a large group claim. Rather, the Court still found that access to justice in Zambia was jeopardised for a group tort claim for two reasons: the claimants had no prospect of funding the claims in Zambia because Zambian law does not permit conditional fee agreements, and (according to the evidence available to the first instance judge) no law firms in that jurisdiction have the requisite resources or experience to properly represent the group claim. 

The Supreme Court differed from the lower courts concerning the importance of Article 4.1 of the Recast Brussels Regulation (which confers a right on any claimant to sue an English domiciled defendant in English courts) when it comes to settling the jurisdictional question.[1] In these cases, to avoid the risk of conflicting judgements England will usually be a proper place to bring a claim for both the parent and the non-domiciled subsidiary. 

The lower courts, including the first instance judge, considered this mandatory provision a ‘trump card’ to which all other considerations regarding forum should cede, however the Supreme Court found this was not the case, rather it is one consideration among others to be considered [82].  Claimants have a choice when contemplating which jurisdiction they ought to bring a claim: whether to run the risk of irreconcilable judgements by having parallel proceedings in England and Zambia, or avoiding that risk by suing both defendants in the same proceedings and jurisdiction [83]. 

In this case, Vedanta agreed to submit to the jurisdiction of the Zambian courts, and all the other connecting factors (the location of the harm, nationality of claimants, location of documents and other evidence, competency of the courts and their knowledge of the applicable Zambian law) point to Zambia being “overwhelmingly the proper place for a claim to be tried” [85]. If this were the whole story then Article 4 would not be a trump card to anchor the case in England, and the weight would fall to Zambia being the most appropriate forum. If this were the whole story, the Court would have granted the appeal and declined jurisdiction to the claimants. However, because of the fore-mentioned overriding issues of access to justice, in this case England was determined to be the appropriate forum. This stance is consistent with previous positions of the court and English common law: the same exception to the forum non conveniens principle was demonstrated in The Vishva Ajay [1989] 2 Lloyd’s Rep 558 (QB) [560] in which the court denied to stay proceedings in England because of the possibility of substantial injustice in the natural forum (India). 

This is significant, because it shows the cognisance of the Court to the importance of material access to justice. This is a fundamental hurdle to claims by communities without the resources necessary to launch expensive, prolonged suits. Without appropriate fee-arrangements, these claims would not be brought, and accountability for harms perpetrated against the poorest communities would continue to be denied.

Conclusion

Today the UK’s highest court drew a bright red line between (ostensibly) soft CSR commitments and a company’s duty of care to abide by those commitments.  Whether courts take full advantage of the opportunity provided by the Supreme Court in this case remains to be seen, however on a number of fronts, there is now more reason for optimism for those seeking to hold parent companies accountable for extraterritorial harms. 

The previous restrictive approach taken by the courts regarding finding a ‘triable’ case during initial jurisdiction proceedings appears to have been broadened. The Court has however made it clear that the EU regulations regarding jurisdiction are not the catch-all previously envisioned, but rather the courts must weigh all the relevant issues before determining jurisdiction. This is not necessarily a bad thing for potential claimants: group tort claims are being brought to the UK not because of its sunny weather, but often rather because of the availability of fee arrangements that would allow for high-magnitude group claims (such as conditional fee agreements, as discussed in Lungowe and Ors. v Vedanta Resources Plc and Konkola Copper Mines Plc [2017] EWCA Civ 1528 at [125], [179]) against defendants capable of meeting the financial penalty. The Court has made it clear that even if the natural forum is capable of handling a claim in every other way, claimants may seek the service of English courts for the appropriate fee arrangements alone. 

Next is the real test, as for the first time a UK company will face trial and potentially accountability in the UK for the environmental harms associated with operations of its foreign subsidiary.  

[1] Article 4.1: “Subject to this Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State”

Editor's Note: Catherine Dunmore is an experienced international lawyer who practised international arbitration for multinational law firms in London and Paris. She recently received her LL.M. from the University of Toronto and her main fields of interest include international criminal law and human rights. Since October 2017, she is part of the team of the Doing Business Right project at the Asser Institute.

Introduction

The Court of Appeal in London recently handed down its judgment in Dominic Liswaniso Lungowe and Ors. v Vedanta Resources Plc and Konkola Copper Mines Plc [2017] EWCA Civ 1528 (Lungowe v Vedanta) addressing issues of jurisdiction and parent company liability. The judgment runs contrary to the historical legal doctrine that English domiciled parent companies are protected from liability for their foreign subsidiaries’ actions. This decision clarifies the duty of care standard a parent company owes when operating via a subsidiary and opens the gates to other English domiciled companies and their subsidiaries being held accountable for any human rights abuses.

Facts

In 2015, a claim was brought by 1,826 villagers from the Chingola region of Zambia against the London Stock Exchange listed metals and mining company Vedanta Resources Plc (Vedanta), which has a global asset base of almost US$40 billion. Vedanta’s subsidiary Konkola Copper Mines Plc (KCM), a Zambian public limited company which is the largest integrated copper producer in the country, was licenced to extract from the Nchanga copper mine near Chingola. The villagers claimed personal injury, damage to property and loss of income, amenity and enjoyment of land, due to alleged pollution and environmental damage caused by discharges from the Nchanga mine for over a decade. The claimants used Vedanta to anchor their claims in the English courts and received permission to serve KCM out of the jurisdiction. Both Vedanta and KCM applied for declarations that the Court had no jurisdiction to try the claims, or alternatively, that it should not exercise such jurisdiction. These challenges were dismissed at first instance by Mr Justice Coulson, and Vedanta and KCM appealed against his order.

Judgment

The Court of Appeal unanimously dismissed the appeals and confirmed jurisdiction against Vedanta and KCM. Led by Lord Justice Simon, the Court concluded that “there are no proper grounds for re-opening the Judge's decision. The appellants have not persuaded me that the Judge misdirected himself on the law, nor that he failed to take into account what mattered or that he took into account what did not matter. How the various matters weighed with him, either individually or together, was for him to decide, provided that he did not arrive at a conclusion that was plainly wrong. In my view, he did not reach a view that was wrong; he reached a conclusion that was in accordance with the law”.

In its determination of jurisdiction, the Court notably considered the following issues:

1. Whether the claimants' claim against KCM has a real prospect of success;

2. If so, whether there is a real issue between the claimants and Vedanta;

3. Whether it is reasonable for the court to try that issue;

4. Whether KCM is a necessary and proper party to the claim against Vedanta; and

5. Whether England is the proper place in which to bring that claim.

Of particular jurisprudential significance for future cases involving companies’ alleged human rights violations were the Court’s deliberations on issue two relating to parent companies and the duty of care.

Parent company liability and the duty of care

The Court of Appeal’s judgment sought to clarify the duty of care owed by a parent company through its subsidiary’s operations. The judges reviewed the benchmark cases for the imposition of such a duty of care and affirmed the following propositions:

1. “The starting point is the three-part test of foreseeability, proximity and reasonableness”, as enounced in Caparo Industries Plc v Dickman. The fact alone that Vedanta is KCM’s holding company would not make it arguable that Vedanta owed a duty of care, and additional circumstances were required to ground a properly arguable claim.

2. “A duty may be owed by a parent company to the employee of a subsidiary, or a party directly affected by the operations of that subsidiary, in certain circumstances”.

3. “Those circumstances may arise where the parent 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”.

4. “Chandler v Cape Plc and Thompson v The Renwick Group Plc describe some of the circumstances in which the three-part test may, or may not, be satisfied so as to impose on a parent company responsibility for the health and safety of a subsidiary's employee”. If both parent company and subsidiary have similar knowledge and expertise and they jointly take decisions about mine safety, which the subsidiary implements, both companies may owe a duty of care to those affected by those decisions.

5. “The evidence sufficient to establish the duty may not be available at the early stages of the case”, and may be better judged after the pleadings in the case.

In its deliberations, the Court of Appeal considered certain factors as relevant to the existence of a duty of care between Vedanta and the villagers, namely:

• A Vedanta report which stressed that oversight of all its subsidiaries rests with the Board of Vedanta itself and expressly refers to problems with discharges into water at the mine in Zambia.

• A Management and Shareholders Agreement which contractually obliged Vedanta to provide KCM with, among others, geographical and mining services and employee training as well as to procure feasibility studies in accordance with “acceptable mining, metal treatment and environmental practices conducted in Southern Africa”.

• Vedanta's provision of environmental and technical information and Health Safety and Environmental training, as well as its public statements on its commitment to addressing environmental risks and technical shortcomings in KCM's mining infrastructure.

• Evidence from a former KCM employee about the extent of Vedanta's control of KCM’s operational affairs.

Following the above principles relating to the duty of care and in light of the evidence displayed by the claimants, it was concluded that Mr Justice Coulson was entitled to reach his conclusions. Whilst the claim against Vedanta may or may not succeed at trial, it could not be dismissed as not properly arguable. In other words, the Court accepted “that there is a serious question to be tried which should not be disposed of summarily, notwithstanding the question goes to the court's jurisdiction”.

The Court affirmed the long-established principle that a parent company does not automatically owe a duty of care to someone affected by its subsidiary’s actions. Yet, as Lord Justice Simon observed, the defendant's assertion that “there had been no reported case in which a parent company had been held to owe a duty of care to a person affected by the operation of a subsidiary” does not at all “render such a claim unarguable”.

Rather, the claimant must prove that such a duty of care arises; more particularly that the parent company has taken direct responsibility for material health and safety policies or controls its subsidiary’s operations. It follows that the more integration and supervision that can be demonstrated between a parent company and subsidiary, the greater the chance of a duty of care being found, and accordingly the parent company being accountable for any human rights abuses. Moreover, the Court’s hesitancy to conclude at an early stage in proceedings that no duty of care exists, and consequently that there is no real issue to be tried, will likely allow more cases to be determined during the hearing rather than at an interlocutory stage.

Lungowe v Vedanta’s duty of care in light of France’s new duty of vigilance law

Earlier in 2017, the French National Assembly adopted the loi relative au devoir de vigilance des sociétés mères et des entreprises donneuses d'ordre which established a new duty of care for large multinational companies operating in France. The law imposes an obligation of vigilance on companies incorporated or registered in France during two consecutive fiscal years that have either at least 5,000 employees themselves and through French subsidiaries, or have at least 10,000 employees themselves and through subsidiaries located in France or abroad.

The law requires such a parent company to establish and implement a publically available vigilance plan relating to its activities and those of its subsidiaries. The plan includes due diligence measures to identify risks and to prevent serious violations of human rights and fundamental freedoms, health and safety and the environment, resulting from the activities of the company and its subsidiaries, as well as the relevant activities of its subcontractors and suppliers under their commercial relationship. The law lists five such due diligence measures:

1. A risk mapping that identifies, analyses and ranks risks

2. Procedures for regular evaluation of subsidiaries, subcontractors or suppliers with whom an established commercial relationship is maintained

3. Adapted actions to mitigate risks or prevent serious harm

4. An alert mechanism and the collection of reports relating to the existence or realisation of risks, drawn up in consultation with the representative trade union organisations

5. A monitoring mechanism to follow-up on the plan’s implementation and evaluating its effectiveness.

Any company put on formal notice to comply with these vigilance obligations can face penalties if they fail to do so within three months.

    The French law is widely viewed as a major step forward, although by no means a panacea, to improving corporate respect for human rights and the environment. Although only applicable to an estimated 100-150 large companies, in passing the law the French National Assembly acknowledged the need for corporations to be held accountable for their worldwide activities, rather than hiding behind the corporate veil. The new French law requirements are markedly different from those found in the Modern Slavery Act 2015 of the United Kingdom and the California Transparency in Supply Chains Act of 2010, which only require companies to report on any efforts to identify certain forms of human rights related risk. In comparison, companies caught by the French law are actually required to implement a vigilance plan.

However, under the French law the legal emphasis is on a company evidencing it has done everything in its power to establish and implement this vigilance plan, rather than focusing on guaranteeing results in terms of human rights compliance. French corporations can therefore effectively reduce their duty of care liability by creating and executing a plan with accompanying due diligence measures. In contrast, following the jurisprudence of Lungowe v Vedanta, a parent company’s liability may actually increase if it takes responsibility for such material health and safety policies. Accordingly, in order to reduce its liability and the imposition of a duty of care, a parent company might seek to demonstrate a very low level of integration and supervision between itself and its subsidiaries.

This leads to the unsatisfactory position that parent companies in both nations might be able to avoid liability for the actual damage arising from their subsidiaries’ human rights violations. A parent company in France might avoid accountability for its subsidiary’s actions through demonstrating vigilant control and surveillance, whilst a parent company in England might similarly benefit from demonstrating distance and separation. In either case, there remains a legal lacuna whereby parent companies may evade responsibility for grave rights breaches.

Conclusions

Whilst the English courts retain a significant discretion when exercising their judgement in jurisdictional challenges, the judgment in Lungowe v Vedanta may lead to an increase in claims before the courts for alleged human rights abuses by foreign subsidiaries of English domiciled parent companies. The decision might prompt vulnerable English corporations to reassess their compliance with the United Nation’s Guiding Principles on Business and Human Rights, and to demonstrate both their own and their subsidiaries’ respect for and adherence to human rights standards throughout their training, policies and operations. Yet, the significant converse risk is run that parent companies will distance themselves from their subsidiaries’ actions. Ensuring that the responsibility for compliance with human rights obligations remains with a subsidiary may reduce the likelihood of a duty of care being found at a parent company level for any extraterritorial human rights abuses. Ultimately, only time will tell whether Lungowe v Vedanta prompts English domiciled companies to account for, or instead avoid, their subsidiaries’ human rights abuses.