The High Court has rejected jurisdiction challenges by a UK-domiciled company and its Zambian-domiciled subsidiary, allowing a group claim brought by 1,826 Zambian villagers in respect of alleged environmental pollution in Zambia to proceed against both companies: Lungowe & others v Vedanta Resources PLC and Konkola Copper Mines PLC [2016] EWHC 975 (TCC).

This case will be of interest to companies which are headquartered in London but with operations run by subsidiary companies around the world. If a similar approach is adopted in other cases, it may be difficult for such companies to challenge English jurisdiction for claims against both parent and subsidiary based on acts of the subsidiary company abroad – though of course each case will depend on its precise circumstances including (importantly) the nature, scope and extent of the parent company's control.

Background

The claimants sued Konkola Copper Mines plc (KCM), a Zambian company which owns and operates a copper mine in Zambia, and Vedanta Resources plc (Vedanta), a UK-domiciled company which owns a majority share in KCM, in respect of alleged environmental pollution caused by a copper mine in Zambia.

The claim against Vedanta was brought principally in negligence, on the basis that Vedanta breached a duty of care which it was said to owe to the Zambian villagers. The duty was said to arise from the control which Vedanta allegedly exercised over the operations of KCM.

Both Vedanta and KCM challenged the English court's jurisdiction to hear the claim, arguing that it should be heard in Zambia. Mr Justice Coulson rejected both defendants' challenges.

Legal background

Historically, an English court could stay a case against a defendant, whether UK-domiciled or foreign-domiciled, on forum non conveniens grounds if it considered that there was another forum, having competent jurisdiction, in which the case could be tried more suitably.

More recently, however, there has been debate about whether the effect of Article 4 of the Recast Brussels Regulation and the ECJ's decision in Owusu v Jackson Case C-281/02 (discussed here) has been to preclude an English court from staying a claim against a UK-domiciled defendant on forum non conveniens grounds; and, if that was the effect, whether a stay could be granted on any other grounds.

Vedanta and KCM's jurisdiction challenges required the court to consider, for the first time, the consequences of the decision of Owusu v Jackson in the context of large, international group environmental litigation where the claim was brought against the UK-domiciled holding company and its foreign operating subsidiary.

Vedanta's challenge

The claimants argued that, given Article 4 and the decision in Owusu, the court had no choice but to allow the claim against Vedanta to proceed, as the claimants were suing Vedanta as of right in its home jurisdiction.

In response, Vedanta submitted that (a) Owusu was on a set of very different facts which did not apply to this sort of large group claim; (b) the reasoning in Owusu was flawed; and (c) Article 4 was being abused by the claimants, as they were using it as a "device" with which to hook KCM into the jurisdiction of the English court. It was therefore open to the court to stay the claim either on forum non conveniens grounds, or using its ordinary powers of case management.

The judge rejected Vedanta's submissions. He decided that Owusu was binding on him (although he did say that there was force in the submission that the ECJ's reasoning in Owusu is "suspect") and he therefore had no discretion to stay the claim against Vedanta on forum non conveniens grounds.

The judge also held that proving the claimants' actions amounted to an "abuse" of EU law was difficult – Vedanta needed to show that they were joined to the proceedings for the "sole object" of ousting the jurisdiction of another court, or alternatively that the basis of the joinder was fraudulent. Vedanta had not met this high bar.

Whilst the judge did say that he had a discretion to stay a claim on case management grounds, provided there were "rare and compelling circumstances", he elected not to exercise that discretion in this instance. He therefore dismissed Vedanta's challenge.

KCM's challenge

At the heart of KCM's challenge was the point that this was a case whose fundamental focus was Zambia: the claimants were Zambian, the mine was in Zambia, most of the evidence would be in Zambia, the damage occurred in Zambia, Zambian law applied to the claim, any remedial work ordered by the court would be undertaken in Zambia and so on. As a result, England was not the proper place in which to hear the claim against KCM, and the permission which had been granted to allow the claimants to serve KCM out of the jurisdiction should be set aside.

The claimants said they intended that the claim against Vedanta would proceed in England in any event, such that it was reasonable and appropriate for the court also to hear the claims against KCM; otherwise there would be two trials in two different jurisdictions on the same set of facts. They also said that even if England was not the proper place in which to bring the claim, the claimants would not be able to obtain access to justice in Zambia for this type of claim, so the court should allow them to proceed in England.

The judge held that, absent the claim against Vedanta, the factors would point overwhelmingly to Zambia being the fundamental focus of the litigation. England would not be the appropriate place to try the claims against KCM in those circumstances. However, when he took the claim against Vedanta into account, he held that England was indeed the proper place to bring the claim. The judge described what he found to be the alternative – two trials on opposite sides of the world on precisely the same facts and events – as "unthinkable". He therefore held that the claimants made it through the necessary gateway, and allowed their claim against KCM to proceed in England.

Given that the judge had decided that England was the proper place in which to bring the claim, it was not necessary for him to consider the claimants' subsidiary argument that they could not get access to justice in Zambia. However, in obiter comments, he held that there was "clear and cogent evidence" that the claimants would not obtain access to justice in Zambia, principally based on the claimants' evidence that there would be difficulties funding the claim in Zambia.

Duty of care

As noted above, one of the causes of action pleaded against Vedanta was in negligence, on the basis that it owed a duty of care to the Zambian villagers in the vicinity of the mine.

Vedanta argued that the claim against it was so weak that it did not raise a real issue to be tried. It also argued that the claim was a "device", designed to take advantage of the Owusu decision to ensure that the claim continues in England, notwithstanding that the fundamental focus of the litigation is in Zambia. The judge rejected both arguments.

In relation to the merits of the alleged "duty", the judge held that whilst it was not appropriate for the court to conduct a mini-trial, the claim did raise a real issue to be tried. The judge identified the following principles as coming from a collection of cases in the early 2000s principally arising from asbestos mining in South Africa, as well as the Court of Appeal's decision in Chandler v Cape (discussed here):

  • every claim of this kind requires the claimants to satisfy the three part test in Caparo v Dickman;
  • depending on the facts, it is arguable that a claim in negligence against a parent company arising out of the operations of its subsidiary might give rise to liability; and
  • whilst such a claim is more likely to succeed if advanced by former employees, depending on the facts claims made by residents, rather than former employees, are still arguable.

The judge held that the claim in this case is "arguable" in English law and will turn on the documents evidencing the nature, scope and extent of Vedanta's control. He also said that the facts were some way removed from those in Chandler v Cape, and the claimants "may face something of an uphill task" in establishing the indicia referable to Chandler v Cape. However, he said that the pleaded claim is an attempt to come within the scope of the duty found to exist in Chandler v Cape.

The judge also rejected Vedanta's "device" argument, finding that "although strategic assistance that the claims against Vedanta might provide in relation to the jurisdiction arguments raised by KCM's application is one reason for the claim against Vedanta, it is not the only one".