UK Supreme Court Rules Parent Companies Can be Liable for Subsidiaries' Failings

Date : 04/10/2019 @ 1:27PM
Source : Dow Jones News

UK Supreme Court Rules Parent Companies Can be Liable for Subsidiaries' Failings

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--Zambian villagers' case against Vedanta must be heard in English court

--The unanimous ruling made by five U.K. Supreme Court judges could have wider implications

--Supreme Court judges say parent companies are responsible for actions of their subsidiaries

 

By Oliver Griffin

 

The U.K. Supreme Court has ruled that a case by Zambian villagers against Vedanta Resources and its subsidiary Konkola Copper Mines must be heard in English courts in a landmark ruling that could have wider implications for other companies.

Supreme Court judges agreed unanimously that almost 2,000 villagers in Zambia, who allege the loss of livelihoods and damage to their health caused by toxic discharges from Konkola's Nchanga mine entering their water supplies, must have their case heard in the High Court.

As part of the ruling, the judges disagreed with an earlier analysis by the Court of Appeal that said a parent company couldn't incur liability in respect of the activities of a subsidiary.

Leigh Day, the law firm representing the villagers, said the court heard that Vedanta had published material claiming control and responsibility over KCM. The court also heard that in its material, Vedanta assumed responsibility for appropriate groupwide environmental control and sustainability standards, and set out guidelines for training, monitoring and enforcement of the standards, Leigh Day said.

The Supreme Court subsequently ruled that Vedanta must be held accountable for these publicly made statements and that it therefore has a duty of care towards the villagers.

Daniel Leader, a partner at Leigh Day, said: "I suspect in boardrooms around the country there will be consternation at this judgment."

Speaking to Dow Jones Newswires, Mr. Leader said the ruling showed that contrary to the Court of Appeal's previous findings, global policies can be enough for cases to be heard in countries where parent companies are based.

"If the parent company is holding itself out as being responsible for the supervision of the subsidiary its very omission to do anything can constitute an abdication of responsibility," Mr. Leader said.

The law firm said the ruling handed down by the Supreme Court could have wider implications for companies that make public commitments relating to their responsibilities to communities and the environment and then fail to put these into practice.

Alongside Vedanta's responsibility for the mine, the villagers argued that they wouldn't be able to achieve justice in Zambian courts. They cited a lack of available funding and qualified and experienced legal representatives, arguments with which the Supreme Court agreed.

Now that jurisdiction has been asserted, the claims will be heard in the High Court at a date to be determined, Leigh Day said.

Leigh Day also represents two communities from Nigeria in claims against Royal Dutch Shell PLC (RDSB.LN) and its Nigerian subsidiary. Both communities allege they have suffered systematic, continued oil pollution for years because of Shell's operations.

While the Court of Appeal ruled in February last year in a split vote that English courts didn't have jurisdiction over the claims, Leigh Day said it now has more confidence that permission will be granted for an appeal to be heard at the Supreme Court.

No representatives of Vedanta were immediately available for comment.

 

Write to Oliver Griffin at oliver.griffin@dowjones.com; @OliGGriffin

 

(END) Dow Jones Newswires

April 10, 2019 08:12 ET (12:12 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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