In Vedanta Resources plc and another v. Lungowe and others, the Supreme Court considered whether forum shopping by foreign claimants was permitted when using a parent company as an anchor defendant. Four key issues were considered by the Supreme Court: (i) whether the choice of anchor defendant was an abuse of EU law; (ii) whether there was a real issue to be tried against the parent company; (iii) what was the proper place for the claim to be heard; and (iv) whether substantial justice would be served if the claim was heard in Zambia. The Supreme Court found in favour of the Respondents, concluding that Article 4(1) Recast Brussels Regulation effectively ties the hands of Member State courts if there is a genuine reason for bringing a claim against the parent company in that jurisdiction.
The Respondents (Claimants in the original claim) are a group of 1,826 Zambian citizens who live in four communities within the Chingola District of Zambia. The claim, based in negligence and breach of Zambian environmental law, alleged that toxic emissions from the Nchanga Copper Mine in the Chingola District damaged their health and their farming activities from 2005 to date. The second appellant (the second defendant in the main proceedings), Konkola Copper Mines plc ("KCM") is the immediate owner of the Nchanga Mine. KCM is the largest private employer in Zambia and employs 16,000 people, mainly at the mine. Its ultimate parent is Vedanta Resources plc ("Vedanta"), the first defendant (and first appellant), which is incorporated and domiciled in the UK.
The Claimants issued the claim form in the English High Court in July 2015 and served this on Vedanta within the jurisdiction shortly thereafter. The claim form was served on KCM outside the jurisdiction. Both Vedanta and KCM sought to challenge the jurisdiction of the English court.
The High Court and Court of Appeal both found in favour of the Zambian Claimants/Respondents. KCM and Vedanta appealed.
The Supreme Court Judgment
The four main issues considered by the Supreme Court in its judgment are discussed below:
1. A proper anchor defendant?
Article 4(1) of the Recast Brussels Regulation ("Article 4(1)") states that persons domiciled in a Member State shall be sued in the courts of that Member State. The Defendants argued that it was an abuse of EU law for the Claimant farmers to sue Vedanta, as a way of bringing the claim in the English Courts, when Vedanta was not the true target of the claim. In summary, Vedanta and KCM argued that it was not appropriate to name the parent company as an anchor defendant for the sole purpose of being able to bring the claim in a particular jurisdiction. The Supreme Court confirmed the position set out in Owusu v Jackson (2002) stating that Article 4(1) fetters English forum conveniens jurisprudence, stating that where an anchor defendant in a Member State is genuinely pursued for a real remedy, this will not be an abuse of EU law. The Claimants were found to have had a bona fide claim against Vedanta, influenced partly because there was a perception, supported by evidence, that KCM was in a less strong financial position than its parent company.
2. A real issue to be tried against Vedanta
Vedanta argued that the test for a foreign claimant to bring a claim against an anchor defendant outside of their jurisdiction was not met i.e., there was no real issue to be tried. Vedanta argued that it was a novel and controversial extension of the boundaries of the tort of negligence to conclude that it had incurred a duty of care to the Claimants. The Supreme Court concluded that the critical question was whether Vedanta sufficiently intervened in the management of the Nchanga Mine to an extent whereby it had incurred a common law duty of care to the Claimants (or a fault-based liability under the Zambian environmental, mining and/or public health regulations). Whilst stressing that they would not conduct a mini-trial on the issue, the Supreme Court referred to the extensive materials published by Vedanta. These included documents where it asserted its responsibility for the establishment of appropriate group-wide environmental control and sustainability standards. These were implemented throughout the group by training, and were monitored and enforced. The Supreme Court found that this was sufficient to show that it was arguable that Vedanta had the requisite level of involvement in the conduct of operations at the Nchanga Mine.
3. Proper place
When considering the "proper place" to bring the claim, the Supreme Court agreed with Vedanta that the English High Court was not prima facie the proper place. It considered matters such as: the location of the alleged wrongful acts or omissions, the location of the witnesses, the language(s) spoken by witnesses and used in documents and the factual circumstances of the case. These all indicated that Zambia was the proper place for the claim to be heard. However, the appeal failed on the fourth and final limb: substantial justice.
4. Substantial justice
The Supreme Court considered whether there was a real risk of the Claimants being denied substantial justice if the claim was heard in Zambia. Two key points were considered: (i) the practical impossibility of funding such a claim where the claimants were all in extreme poverty; and (ii) the absence within Zambia of sufficiently substantial and suitably experienced legal teams to enable the litigation to be prosecuted effectively. The Defendants argued that only in exceptional cases should funding issues lead to a finding of lack of substantial justice. They argued that substantial justice required the Claimants to take their forum as they found it (i.e., in Zambia), and that the High Court judge had failed to pay due regard to considerations of comity and cogent evidence. The Supreme Court rejected these assertions and instead found that the level of complexity of the claim posed a real risk that justice would not be achieved. The Supreme Court based this analysis on the extensiveness of the expert and factual evidence required and the financial limitations of the Claimants given that causation and loss would need to be determined for each of the individual claimants. Of particular interest to the Supreme Court was the fact that in a recent decision of the Supreme Court of Zambia, Nyasulu v Konkola Copper Mines (2015), only 12 out of 2,000 claimants were successful.
The Supreme Court's judgment highlights that parent companies are at risk of being found to be anchor defendants even though the potential breaches were made by subsidiaries based in overseas jurisdictions. Parent companies based in EU member states are particularly at risk of litigation being brought in the Member State in which they are domiciled, and claimants using that domicile to found jurisdiction. The Supreme Court concluded that Article 4(1) effectively ties the hands of Member State courts if there is a genuine reason for bringing a claim against the parent company in that jurisdiction.