Court of Appeal confirms jurisdiction over UK parent and Zambian subsidiary in pollution case

Lungowe & Others v Vedanta & Others [2017] EWCA Civ 1528 is the latest in a line of cases in which the English courts have shown themselves willing to entertain claims arising out of harm suffered in a foreign jurisdiction. Companies operating in developing jurisdictions overseas will need to consider the issues raised from liability, reputation and insurance perspectives.

The claimants are Zambian citizens who suffered a variety of injuries and other losses due to discharges from a copper mine. Vedanta is the English parent of the Zambian company, KCM, which owns and operates the mine. The claimants argue that Vedanta assumed responsibility for the safety of the mining operations by exercising a high degree of control over KCM, that KCM relied on Vedanta’s superior expertise in health and safety and environmental matters, and that Vedanta knew or ought to have known that the operations were unsafe. In the Technology & Construction Court (TCC), Coulson J dismissed challenges by both KCM and Vedanta to the jurisdiction of the English courts. The Court of Appeal upheld his decision, allowing the claims to proceed to the defence stage.

The Court of Appeal held, firstly, that the English courts not only could hear the claim against Vedanta, but were obliged to do so by virtue of the ECJ decision in Owusu v Jackson [2005] QB 801 on the interpretation of the Brussels Convention (now Regulation). This decided that EU courts have no discretion to decline to hear a claim against a defendant who is domiciled within their jurisdiction simply because another forum would be more appropriate. The Court of Appeal left open the possibility that there might be an exception if a claimant abused EU law to get its claim heard in its chosen jurisdiction, but found that was not what these claimants were doing.

Secondly, in order to proceed in the English courts against KCM the claimants had to show that:

1. the claim had a real prospect of success;
2. there was a real issue to be tried against Vedanta;
3. it was reasonable for the English courts to try that issue;
4. KCM was a necessary and proper party to the claim against Vedanta; and
5. England was the proper place in which to bring that claim.

The Court of Appeal discussed most of these issues relatively briefly before resolving them in the claimants’ favour and in line with the first-instance decision, but considered in some detail whether or not there was a real issue to be tried against Vedanta. The Court of Appeal considered that this meant a properly arguable case or serious question to be tried under the applicable law, in this case that of Zambia. The claimants had expert evidence to the effect that they had a case against Vedanta for breach of Zambian statutory obligations due to the degree of responsibility and control it exercised over the mining operations.

The claimants also argued that the Zambian courts followed the English courts on issues of negligence, raising the prospect that Vedanta could be liable under the principles set out in Chandler v Cape Plc [2012] EWCA Civ 525 regarding assumption of liability by a parent company. This is an application of the more general principles established in Caparo Industries plc v Dickman [1990] 2 AC 605 as to the requirement for proximity between claimant and defendant. The claimants produced a number of public statements, intra-group contracts and training materials by Vedanta indicating that it had undertaken responsibility for the safety of KCM’s operations, as well as a witness statement from a former employee as to the arrangements in practice. The Court of Appeal found that this was sufficient to give rise to an arguable case.

In relation to the proper place in which to bring the claim, the Court of Appeal also took into account the lack of legal aid and funding options available to the claimants in Zambia and difficulties they had encountered in finding a suitably qualified lawyer to argue their case there.

Comment

This decision comes on the heels of Okpabi v RDS & Others [2017] EWHC 89, in which the TCC declined jurisdiction. As a Court of Appeal authority, the analysis in Vedanta should now be preferred as to when the English courts will accept jurisdiction. The courts are willing to exercise long arm jurisdiction over foreign subsidiaries of English companies where there is an arguable case against the parent that can be heard in the same proceedings. The existence of an arguable case is highly fact-specific, but it is more likely where the parent company has represented itself as having responsibility for or expertise in matters relevant to the claim. The lack of adequate access to justice in the subsidiary’s domicile will also be a relevant consideration.

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