Lungowe v Vedanta Resources Plc [2019]

Lungowe v Vedanta Resources Plc [2019] UKSC 20 is a significant UK company law and tort law case that revolves around the liability of businesses for human rights violations and environmental damage. The case particularly addresses the duty of care owed by a parent company concerning the actions of its subsidiary.

The lead claimant, Dominic Liswaniso Lungowe, and 1,825 other Zambian citizens alleged that Vedanta Resources plc breached its duty of care by failing to ensure that its Zambian subsidiary, Konkola Copper Mines Plc (KCM), would not cause harm to the environment and local communities. The claimants sought compensation for personal injury, property damage, loss of income, and other harms resulting from discharges from a copper mine operated by KCM. Vedanta argued that the English court lacked jurisdiction and should stay proceedings on forum non conveniens grounds.

The Supreme Court unanimously held that Vedanta Resources plc could be sued in England. The court applied Zambian law, similar to English tort law principles, and found that there was an arguable case that Vedanta, as the parent company, had assumed responsibility or owed a duty of care to the claimants harmed by the actions of its subsidiaries.

Lord Briggs emphasised the critical question of whether Vedanta sufficiently intervened in the management of the Zambian mine to incur a duty of care. The extent of intervention, a matter of Zambian law, depended on factual evidence, including internal documents and communications between Vedanta and KCM. He acknowledged the dilemma faced by judges in summary judgment applications, requiring claimants to demonstrate an unsuitable case for adverse determination without a trial while considering reasonable grounds for further investigation.

Lord Briggs rejected the notion that the case raised a novel and controversial extension of the tort of negligence. He stressed that the parent-subidiary relationship alone did not impose a duty of care, and the crucial factor was the level of intervention, control, and supervision exercised by the parent over the subsidiary's activities. He highlighted that group-wide policies and guidelines could lead to a duty of care if the parent took active steps, such as training and enforcement, to ensure their implementation by subsidiaries. Holding out the parent as exercising supervision and control could also create a duty of care. Lord Briggs concluded that there was enough material, particularly Vedanta's published statements on environmental control standards, to show an arguable case for Vedanta's duty of care. The need for a cautious approach was acknowledged, given the pending disclosure of internal documents.

The case clarified that a parent company could incur a duty of care if it actively intervened in and assumed responsibility for the activities of its subsidiary, especially concerning environmental standards. Group-wide policies could become a basis for a duty of care if the parent actively ensured their implementation by subsidiaries through training, monitoring, and enforcement. The decision highlighted the significance of internal documents and communications in determining the level of intervention and control exercised by a parent company. The court rejected the notion of introducing a novel category of negligence liability, emphasising that the principles applied were consistent with established tort law. The judgment emphasised the need for a cautious approach in determining triable issues, especially when dealing with complex cases involving internal documents yet to be disclosed.

In summary, this case clarified the conditions under which a parent company could be held responsible for the actions of its subsidiary, emphasising the need for a factual inquiry into the level of intervention and control exercised by the parent company.
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