The recent Supreme Court decision of Vedanta v Lungowe[1] is now the leading case on establishing jurisdiction in England for claims against parent companies and their subsidiaries for alleged environmental and human rights abuses of the subsidiary committed abroad. The decision, delivered by Lord Briggs, is less clear than could be hoped. In particular, by changing the law on the question of the proper forum, there are important questions left unanswered.
The facts
The claimants were around 1,826 Zambian citizens who are living in four communities within the Chingola District. The claim, for which they were seeking to establish that an English court had jurisdiction over, is for compensation for health and farming activities that have been damaged by what are claimed to be toxic emissions from the Nchanga Copper Mine (“the Mine”) which is located within the Chingola District.
the usual principles of negligence apply
The defendants were: (I) Konkola Copper Mines plc (“KCM”), the immediate owner of the Mine; and (2) Vedanta Resources plc (“Vedanta”), the ultimate parent company of KCM. The issues on appeal concerned the English court’s jurisdiction to hear the claim against Vedanta and KCM respectively. As Vedanta was domiciled in England, the European regime for establishing jurisdiction (in particular, Article 4 of Brussels I (Recast) Regulation (EU) 1215/2012) applied. KCM, on the other hand, was domiciled in Zambia and so CPR Rules 6.36 and 6.37 and Practice Direction 6B para. 3.1 applied; i.e. was there a “real issue” between the claimants and Vedanta and KCM was a necessary and proper party and England and Wales was the “proper place” in which to bring the claim.
The court at first instance and the Court of Appeal
Coulson J gave judgments in the claimants’ favour against both defendants: (1) As regards Vedanta, he held that there was jurisdiction for the claimants to sue Vedanta in England in accordance with Article 4(1); (2) There was no need to make a reference to the CJEU because Owusu v Jackson[2] was of clear application and consequently Vedanta could be sued in England; (3) There was also no abuse of EU law in bringing the claim against Vedanta.
As for the claim against KCM, he held that all of the requirements for permission to serve out were met and that the English court had jurisdiction over that claim as well. There was a real issue as between the claimants and Vedanta – the claim against Vedanta was not bound to fail. He accepted that KCM was a necessary or proper party to the dispute between the claimants. He held that England was the proper forum to hear the dispute against KCM as well and that there was a real risk that substantial justice would not be obtained in Zambia. It is worth noting from the outset that the claimants only needed to fulfil either the proper forum test or risk of substantial injustice test after the other parts of the test were met.
The Court of Appeal upheld the decision in all substantive respects, though there were some minor criticisms of the way the judge had approached the issues. The defendants appealed to the Supreme Court.
The decision of the Supreme Court
Four points were on appeal to the Supreme Court; only the first was relevant to the English court’s jurisdiction to hear the claim against Vedanta. First, whether it was an abuse of EU law for the claimants to use Article 4 to establish jurisdiction over Vedanta to anchor the claim against KCM who was (allegedly) the real target. Second, whether there was a real issue between the claimants and Vedanta. Third, whether England was the proper forum or proper place for the claim to be heard (also referred to as forum conveniens). Fourth, whether there was a real risk that substantial justice would not be obtained in Zambia.
Abuse of EU law
Despite receiving very little attention at the oral hearing, the abuse of EU law issue accounts for a large part of the judgment. Lord Briggs explains that the uncontroversial effect of Owusu v Jackson is that Article 4(1) confers a right on any claimant to sue an English domiciled defendant in England. This is not subject to arguments about the proper forum, unlike where jurisdiction is sought to be established under the common law rules.
the English court has one hand tied behind its back… the other is, in many cases, effectively paralysed
In short, he held that the abuse of EU law was limited to cases where the sole purpose of the joinder of the anchor defendant was to sue another defendant outside of the member state where it was domiciled.[3] He further added that the case law suggested that the abuse of law doctrine is limited to the invocation of one EU principle so as to improperly subvert another.[4] This was not the case in Vedanta, where the defendants were arguing that Article 4 was being misused to circumvent the English national rules for establishing jurisdiction. This was arguably dipositive of the point.
However, he goes on to describe the effect of Owusu v Jackson as being that “the English court has one hand tied behind its back… the other is, in many cases, effectively paralysed”[5] in that it is unable to stay the proceedings against the anchor defendant on the basis that England is not the appropriate forum. He explains that the effect of this is that where the claimants will continue in England against the anchor defendant (here Vedanta) regardless of what happens to the claim against the foreign defendant (here KCM), the risk of irreconcilable judgments becomes a formidable obstacle to establishing the appropriate forum as somewhere other than England. While Lord Briggs acknowledged this problem, he held that abuse of EU law is not the correct legal means of addressing the problem. Instead, he concluded that the remedy for this problem in “lies in an appropriate adjustment of the English forum conveniens jurisprudence” is. Unsurprisingly, he returned to this point later.
Real issue to be tried as against Vedanta
At the outset, Lord Briggs sets out that the appropriate test is the summary judgment test confirmed in Altimo Holdings and Investment Ltd v Kyrgyz Mobil Tel Ltd[6]. He then identified the crucial question as whether Vedanta sufficiently intervened in the management of the Mine owned by KCM to have either incurred a common law duty of care under or fault-based liability under Zambian environmental, mining and public health legislation.[7]
The appellants sought to argue that the claim gave rise to a potentially novel duty of care. In response Lord Briggs makes the interesting comment:
“It might be thought that an assertion that the claim against Vedanta raised a novel and controversial issue in the common law of negligence made it inherently unsuitable for summary determination. It is well settled that difficult issues of law of that kind are best resolved once all the facts have been ascertained at a trial, rather than upon the necessarily abbreviated and hypothetical basis of pleadings or assumed facts.”[8]
Lord Briggs rejected the defendants’ submission that a parent company could never incur a duty of care for the activities of a subsidiary simply by laying down group wide policies and requiring the management of each subsidiary to implement them. He pointed out that group wide guidance could be shown to contain systemic errors which could cause harm to third parties.[9]
Lord Briggs rejected the defendants’ submission that a parent company could never incur a duty of care for the activities of a subsidiary simply by laying down group wide policies
He also considered the law was not confined to two types of cases where parent companies might incur a duty of care, which was the formulation adopted by Sales LJ in AAA v Unilever[10] – saying that he would be reluctant to shoehorn all cases of the parent’s liability into specific categories. He highlighted that practically there is no limit to the ways in which multinational groups of companies choose to manage and control activities.[11] The law should be sufficiently flexible to recognise this.
Continuing on this theme, he held that there is nothing special about the bare parent and subsidiary relationship.[12] Of course, in reality parent companies are in such a position that they have an opportunity to exert power over the subsidiary. He held (agreeing with the Court of Appeal) that the judge and the claimants had imposed upon themselves the “straitjacket” of the Chandler v Cape[13] indicia which were no more than examples.[14]
Applying normal principles, Lord Briggs reviewed the material which was before the judge and the Court of Appeal and held that there was no reason to interfere with the judge’s discretion. However, he did make the following remark which is likely to be of interest to judges at first instance reviewing similar material:
“For my part, if conducting the analysis afresh, I might have been less persuaded than were either the judge or the Court of Appeal by the management services agreement between the appellants, or by the evidence of Mr Kakengela.”[15]
He instead appears to find the public facing documents more persuasive in coming to the conclusion that there was an arguable duty of care. This is likely to be of interest to parties fighting similar cases in future.
He briefly considered the breach of statutory duty but held that as it made no difference to the overall appeal it was unnecessary to conduct a minute examination of the issues.[16]
Appropriate forum
Having set up his analysis on the problems with Owusu in the context of the abuse of EU law argument, Lord Briggs describes the appropriate forum as the most difficult issue in the appeal.[17] A key difficulty being that there were strong connecting factors between the claim and Zambia, and had the English court retained its jurisdiction to stay the proceedings against the anchor defendant, it would have done so to allow the case to be brought against both defendants in Zambia. Following Owusu the court was disabled from doing so.
the judge made an error of principle by failing to consider the fact that Vedanta had submitted to the jurisdiction of Zambia
Lord Briggs observed that prior to Owusu, in cases where the claimants could in any event continue against the anchor defendant in England, the avoidance of irreconcilable judgments was frequently found to be decisive in favour of England as the proper place, even in cases where all the other connecting factors appeared to favour a foreign jurisdiction. Thus in this sense, the possibility of irreconcilable judgments appeared to be some kind of trump card for claimants to succeed in forum conveniens arguments.
Lord Briggs was troubled by the fact that in this case the anchor defendant (Vedanta) had by the time of the hearing offered to submit to the jurisdiction of the Zambian courts. The result was that the risk of irreconcilable judgments only arises because the claimants had elected to exercise their rights to continue against Vedanta in England rather than Zambia. In those circumstances, why should the risk of irreconcilable judgments be the decisive factor when the claimants had brought this risk on themselves.
Lord Briggs considered the decision of Leggatt J in OJSC VTB Bank v Parline Ltd[18], which the judge viewed as indistinguishable from the current case. Leggatt J had held that even though the parent company had submitted to proceedings in Russia, this did not point to Russia as the appropriate forum because some of the defendants were being sued “as of right” after Owusu in England. Leggatt J took the view that “there is no reason why the claimant should be expected or required to relinquish that right in order to avoid duplication of proceedings.”[19]
Lord Briggs held that the decision by Leggatt J was wrong because the risk of irreconcilable judgments would then always be decisive when Article 4 was the basis for establishing jurisdiction against one of the defendants.[20] Instead, he held that the judge made an error of principle by failing to consider the fact that Vedanta had submitted to the jurisdiction of Zambia. He highlighted that the judge had held that aside from the risk of irreconcilable judgments, Zambia was overwhelmingly the proper place for the claim against KCM to be tried. Accordingly, he upheld the appeal on this point, though because of his findings on risk of substantial injustice it did not affect the overall result of the appeal.
Substantial injustice
Lord Briggs set out that the correct test is whether there is a real risk that substantial justice will not be obtainable in the foreign jurisdiction.[21] He summarised that the judge had held that there was a real risk of substantial injustice because of broadly two factors. First the impossibility of funding group claims when all the claimants were in extreme poverty given that they could not get legal aid for their claims and Conditional Fee Agreements are unlawful in Zambia. Second, the absence of specialised and sufficient legal teams within Zambia who would be up to the task of bringing the claim.
Lord Briggs held that the defendants made a “full-frontal attack on the judge’s conclusions”[22] which he noted had support from the written intervention by the Attorney General of Zambia. He held that none of their criticisms was valid and stressed that the judge had given his full and detailed attention (notwithstanding the fact that his findings on the proper forum rendered access to justice rendered this point obiter dicta). He had not misdirected himself in law in any sense.
Points of particular note
First, though not of substantive importance to the decision, Lord Briggs once again stressed that jurisdiction challenges such as this one are being litigated in a disproportionate manner.[23] He said that the parties are better spending their time focusing on the substantive issues between them. However, frequently the decision on jurisdiction may have huge repercussions for the parties themselves – sometimes it can be decisive for the entire case. He referred to Lord Templeman’s statement“an appeal should be rare and the appellate court should be slow to interfere”. Given that Lord Briggs in part allowed the appeal of KCM on forum conveniens his judgment is unlikely to have the effect he desires.
Of critical importance is the Supreme Court’s rejection of the conceptualisation of parent company liability as being generally confined to two types of cases
Second, the judgment on the real issue at least on its face seems to make it much easier for claimants to establish that there is an arguable duty of care. This is in keeping with the trend of a flurry of recent Supreme Court cases on existing categories of duty of care including, Robinson v Chief Constable of West Yorkshire Police[24] and Darnley v Croydon Health Services NHS Trust.[25] Of critical importance is the Supreme Court’s rejection of the conceptualisation of parent company liability as being generally confined to two types of cases (as suggested by Sales LJ (as he then was) in AAA v Unilever). Lord Briggs also suggests that public documentation on how the parent and subsidiaries have structured responsibilities will be highly relevant to establishing an arguable duty of care, perhaps over and above agreements between the subsidiary and the parent.
Third, the decision of the proper forum is novel and represents, as Lord Briggs himself accepts, a change in the law (or rather as he puts it an “adjustment”). It flows from the fact that he considers it is unjust for a claimant to rely on the risk of irreconcilable judgments in circumstances where it is a result of their own decision that this risk arises. Thus he determined that the judge should have taken into account was Vedanta’s submission to the dispute being determined in Zambia and that (save for the substantial injustice point) this would have resulted in England not being the proper place for the claim against the foreign defendant (KCM). Even if this meant that the claimants could maintain their claim against the anchor defendant in England.
The focus on whether the anchor defendant has submitted to being sued in a foreign jurisdiction will have significant practical implications for the parties. Conceptually, with respect, this approach has three difficulties: (1) Timing – when is it that the anchor defendant can submit to the foreign jurisdiction in order for this to be a factor to take into account? If the parent company submits after a decision at first instance, how does the Court of Appeal evaluate the exercise of discretion? (2) It has the effect of prioritising the defendant’s interests over those of the claimant. This is unsatisfactory as this can be (and was) a decisive issue in the case yet, it is completely outside of the claimants’ control; (3) It is also unsatisfactory for defendants as it is difficult to ascertain precisely what weight the submission to another jurisdiction should be given. It appears that Lord Briggs may have swapped one trump card for another, but this might not necessarily be the case.
Fourth, Lord Briggs specifically considered whether having sittings in Zambia or having evidence given via video link could impact upon the question of forum conveniens, a point raised by Lady Hale during the hearing. Recently, in Kalma v African Minerals Ltd[26] Turner J sat in Sierra Leone (where the facts that gave rise to the dispute occurred) for some of the hearing and for the Kenyan Emergency Litigation witnesses gave evidence via a video link. He notes that modern facilities would reduce the inconvenience of having volumes of documents located in Zambia. However, again, he fails to set out any conclusions as to how this is relevant for the evaluation of appropriate forum in the modern age – something which is of great practical importance to the parties to such disputes.
Conclusion
In conclusion, the most striking aspect of the Supreme Court decision is that it changes the law on the proper forum but gives very little guidance on what or how various factors should now be balanced against one another. In particular, the relevance of a parent company submitting to a foreign jurisdiction appears to have been decisive in this case, yet the repercussions of this for future cases appears to be given scant attention. It is not clear how this will impact upon the results in future cases, or whether the change is a true solution to a perceived problem. It would have been more appropriate for this issue to have been looked at in a broader context, rather than considered on a case by case basis.
[1] [2019] UKSC 20 (“the judgment”)
[2] Case C-281/02; [2005] QB 801
[3] [35] of the judgment
[4] [36] of the judgment
[5] [39] of the judgment
[6] [2012] 1 WLR 1804
[7] [44] of the judgment
[8] [48] of the judgment
[9] [52] of the judgment
[10] [2018] EWCA Civ 1532
[11] [51] of the judgment
[12] [54] of the judgment
[13] [2012] 1 WLR 3111
[14] [60] of the judgment
[15] [61] of the judgment
[16] [65] of the judgment
[17] [66] of the judgment
[18] [2013] EWHC 3538 (Comm)
[19] [2013] EWHC 3538 (Comm) at [10]
[20] [78] of the judgment
[21] [88] of the judgment
[22] [92] of the judgment
[23] Stressed many times, first by Lord Templeman in Spiliada Maritime Corpn v Cansulex Ltd (“the Spiliada”) [1987] AC 460, 465 and Lord Neuberger in VTB Capital plc v Nutritek International Corpn [2013] 2 AC 337 at paragraphs 82 to 83.
[24] [2018] A.C. 736
[25] [2018] 3 WLR 1153
[26] [2018] EWHC 3506 (QB)
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