Parent companies finding themselves under litigation for issues arising in different countries at the operations of their subsidiaries is a relatively new phenomenon. But it is one the legal community say is increasing and dual-listed multinational companies need to pay attention.
So far, these cases include one brought against Vedanta Resources, a global diversified metals and mining company headquartered in London. Itis being sued by nearly 2,000 Zambian villagers who allege their land and livelihoods were destroyed by water contamination caused by the Vedanta-owned Konkola Copper Mines.
In another recent case, Gemfields, which owns jewellery-maker Faberge, was sued in the UK by 100 Mozambicans claiming alleged human rights abuses at its subsidiary’s Montepuez Ruby Mining mine. The claimants alleged they had been shot, beaten, subjected to humiliating treatment and sexual abuse, among other abuses. In January Gemfields agreed to a settlement of these claims.
Others cases include one brought against BHP Billiton in November last year by 240,000 individuals in Brazil over the failure of the Fundao dam in 2015 and in Canada Nevsun Resources is accused by four Eritrean workers of human rights abuses and the use of forced labour at its Bisha gold. The case is currently being considered by the Supreme Court.
All of these cases, says Aidan Thomson, a partner at Bryan Cave Leighton Paisner, are about determining whether the UK – or Canadian – courts should consider issues that centre on events that happen in other countries, and by claimants that live overseas.
Generally speaking, at least in the UK, a court will not decide on a case that has nothing to do with the UK. Therefore, these cases depend on having what is called an ‘anchor defendant’ in the UK, which is often the parent company.
“These aren’t cases trying to breach the corporate veil, trying to make the parent company liable for things the subsidiary has done wrong, such as breaches of duty by the subsidiary – but to determine that the parent company themselves has breached its duty to the people living overseas – that is really what these cases hinge on,” explains Thomson.
In the ongoing Vedanta Resources cases, the company has appealed to the Supreme Court to prevent the case being heard in the UK, saying it should be heard in Zambia instead.
Last year, the court of appeal upheld a high court ruling that the Zambian claimants had a legal right to bring their claim against a British company, citing the companies “opaque finances” as a reason the claimants may not be granted justice in Zambia.
The court’s decision is expected in April, which could set a precedent for ‘duty of care’ owed by a UK parent company to the communities affected by a foreign subsidiary.
“It is a pivotal moment,” says Nicole Bigby, partner and general counsel at Bryan Cave Leighton Paisner. “You have a fairly unique situation where the Supreme Courts of two legal systems are considering, not only whether it is right to determine if a particular country is an appropriate forum, but also looking to explore in what circumstances these parent companies might potentially owe duties of care to these individuals or communities or groups of plaintiffs.”
Until now, she says, there has not been clarity, with the Court of Appeal in the UK approaching these cases in different ways. It has given judgement in three cases and only in one – the Vedanta Resources case – did it find the parent company owed direct duty of care, meaning the case can be heard in London. In the others cases, it said there was no obvious duty of care owed by the parent company to the people living abroad locally.
However, this inconsistency has effectively given the plaintiff bar the opportunity to bring these actions and claimants, which often can’t find appropriate legal recourse in their own countries, to the UK and other countries.