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Sins of the fathers: Supreme Court clarifies the rules for establishing anchor defendants

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Contrary to other recent decisions, the Supreme Court has upheld the Court of Appeal in Vedanta Resources PLC and another (Appellants) v Lungowe and others (Respondents) [2019] UKSC 20, by unanimously dismissing the Appellants' appeal on the grounds of jurisdiction and allowing proceedings against a UK-based “anchor defendant”, so also securing jurisdiction in England against the overseas defendant.

Background

Konkola Copper Mines plc (“KCM”) is a Zambian subsidiary of Vedanta Resources PLC (“Vedanta”), a UK-registered parent company. KCM owns and operates the Nchanga Copper Mine in Zambia, one of the largest copper mines in the world. The Claimants, 1,826 Zambian citizens living in close proximity to the mine, alleged that discharge from the mine polluted the local waterways, caused personal injury, and damaged property, leading to loss of income. The claim was brought in both negligence and for breach of Zambian environmental law.

The Claimants issued proceedings in England against Vedanta and obtained permission to serve proceedings on KCM out of the jurisdiction. Vedanta and KCM challenged the jurisdiction of the English courts to hear this claim. In 2016, the High Court held that although the tort and subsequent harm occurred in Zambia, the Claimants could bring proceedings in the English courts. On appeal in 2017, the Court of Appeal upheld the High Court's judgment. Vedanta and KCM obtained leave to appeal these decisions before the Supreme Court.

Supreme Court decision

The Supreme Court was required to address four issues in considering this appeal:

  1. Was there an abuse of EU law?
  2. Was there a triable issue to be heard against Vedanta?
  3. Were the English courts the proper place for this claim to be heard? and
  4. If Zambia was considered the proper place for the claim, could substantial justice be obtained there?

Abuse of EU law:

Although establishing English court jurisdiction over KCM was also considered a key part of the Claimants' decision to litigate in England, it was not the sole purpose, and so the lower courts found no reason to deviate from the established principle of EU law that a court cannot decline jurisdiction where a defendant is a company domiciled in a Member State.

As the Supreme Court found no error in the law applied by previous judgments, they did not revisit these factual findings.

A triable issue against Vedanta:

The lower courts conducted a summary review of the available evidence to establish whether Vedanta owed a duty of care to the Claimants and/or was in breach of Zambian environmental law. The courts concluded that certain material appeared, at face value, to support the view that the Claimants’ case that the parent owed a duty of care was arguable, such as:

  • A sustainability report which referenced problems arising at the mine (including discharges into waterways), and emphasised the direct oversight of subsidiaries by the Vedanta board;
  •  ­A management service agreement in which Vedanta would provide services, such as staff training, to KCM; and
  •  ­Public statements which indicated Vedanta's commitment to rectify environmental risks and technical issues at the mine. 

The Supreme Court rejected Vedanta’s argument that the summary review had erroneously extended the scope of the tort of negligence in finding a triable issue against Vedanta.  Indeed, the Supreme Court was not distracted by whether or not the lower courts’ factual findings were correct, but more concerned with whether there was sufficient material upon which to base the conclusions reached.  The Supreme Court found that “it is well arguable” on the evidence available that there was a sufficient level of intervention by Vedanta in the operation of the mines.

Proper place:

The Supreme Court disagreed with the lower courts, finding that the Claimants had multiple options at their disposal, such as suing both parties in Zambia (which Vedanta had agreed to), or suing Vedanta in England and KCM in Zambia, albeit with the risk of irreconcilable judgments. Focusing on the latter, the court referenced Article 8 of the Recast Brussels Regulation, which gives a Claimant the choice, but not an obligation, to consolidate proceedings to a single Member State in order to avoid the possibility of irreconcilable judgments. The Supreme Court considered that a similar position would apply, and so did here, even where the Claimant was not domiciled in the EU.

Substantial justice in Zambia:

Having stated that Zambia was clearly the proper place for the claim, Lord Briggs clarified that evidence concerning the availability of access to substantial justice is rightly considered separately and may be a ground for derogating from any finding about proper place.

Following the findings of the lower courts, the Supreme Court was persuaded by two primary factors put forward to evidence the lack of access to substantial justice if the case were heard in Zambia:

  1. The Claimants lived in extreme poverty which would make it practically impossible to fund a group action such as this (particularly as conditional fee arrangements are not lawful in Zambia); and
  2. There was an absence in Zambia of legal teams with the required resources or experience to effectively litigate a claim of this size and complexity.

Conclusion

The Supreme Court’s decision is out of the ordinary in that it bucks the trend of refusing jurisdiction in cases where anchor defendants are sued in respect of claims against overseas subsidiaries.  In doing so, the Supreme Court has emphasised four key factors:

  1. Article 4 of the Recast Brussels Regulation is good law and provides the right to establish jurisdiction against an anchor defendant; the fact that it impinges on the English law doctrine of forum conveniens is not an abuse of EU law;
  2. The question of whether there is a real issue to be tried is effectively a summary judgment test, and in this case there was sufficient information in the material provided to say it was reasonably arguable that Vedanta had sufficient control to owe a duty of care;
  3. On the test of proper place for the litigation alone, the claimants would have failed; but
  4. That can be overridden in circumstances where substantial justice will not be available in the proper place, as was the case here.

This article was co-authored by Andrew Cottrell, second year trainee solicitor at Ince.

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