Appeal in Zambian mining case: Lungowe v Vedanta highlights important points regarding parent company liability under English law

Posted in Blog post Eastern Africa Western Africa Central Africa Southern Africa Northern Africa Mining

Summary

The English Court of Appeal has allowed 1,826 Zambian villagers to bring a claim in England against UK-based Vedanta Resources Plc (Vedanta) and its Zambian subsidiary Konkola Copper Mines Plc (KCM). This decision raises important questions about whether parent companies can be liable alongside their foreign subsidiaries for harms occurring abroad, and leaves open the possibility that parent companies could be liable to communities affected by their subsidiaries’ operations under English law. 

Background

Residents of Chingola, Zambia brought proceedings in the English courts against UK-incorporated Vedanta and its Zambian subsidiary KCM, claiming that waste from the Nchanga mine, owned and operated by KCM, had polluted the local waterways, causing personal injury, damage to property and loss of income. The majority of the Court of Appeal dismissed the defendants’ appeal against the High Court decision, allowing the case to proceed before the English courts. 

Key takeaways

  • The Court of Appeal concluded that where an English domiciled company is sued in England, the English courts have to assume jurisdiction, even though a third country might also have jurisdiction and may in fact be a more appropriate forum.
  • The Court examined the existing case law on parent company liability for subsidiary acts, and held that the claimants’ case that Vedanta had assumed such a duty of care was arguable on the basis that it had, inter alia, provided financial support and health and safety training to KCM and had released public statements emphasising its commitment to addressing environmental risks and technical shortcomings in KCM’s infrastructure.
  • The Court also noted that evidence sufficient to establish a duty of care may not be available at the early stages of the case, leaving the prospect that during the trial on the substantive issues, the trial judge might hold that Vedanta did not in fact owe a duty of care to the claimants, but may still continue to hear the Zambian claimants’ claims against Zambia-incorporated KCM in England.
  • It is clear from Vedanta that there is nothing in principle which would prevent a parent company being found to owe a duty of care to persons adversely affected by a subsidiary’s operations who are not employees of the subsidiary (in this case, members of the local community).
  • On the question of whether the claim against KCM should be heard in Zambia, the Court agreed with the High Court that parallel proceedings against Vedanta in the English courts and KCM in the Zambian courts would be unthinkable and therefore held that England was the proper place for the claims against both defendants (given the similarity of facts and legal principles at issue).
  • The Court also accepted the claimants’ argument that they were precluded from bringing the claims in Zambia because of issues with access to justice in the Zambian justice system on the basis that the evidence presented in the first instance proceedings against the Zambian justice system was so “overwhelming” that it was almost certain that the claimants would be unable to obtain justice in the Zambian courts, where conditional fee agreements are unlawful and legal aid would not be available. 

Lessons

Vedanta highlights the need for multinational companies to be aware that overseas claimants may be able to bring claims against them in the English courts and that the scope of potential claimants may soon be widened to communities affected by the operations of a local subsidiary. Vedanta and KCM have stated that they intend to apply for permission to appeal this judgment.

 

The Inside Africa team would like to thank Louise Holt, Trainee Solicitor, for her contribution to this blog post.

 

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