High Court allows claim against foreign subsidiary and English parent company to be heard in the UK

The High Court has rejected applications by an English parent company and its Zambian subsidiary that claims brought against them in London should be dismissed in favour of proceedings taking place in Zambia.

The Claimants benefitted from the combination of the rule in Article 4 of the Brussels Regulation Recast that a defendant domiciled in a Member State can be sued in its state of domicile and a recent decision of the English courts that parent companies can, in some circumstances, be liable for activities of their foreign subsidiaries.

Background

The Defendants in this case were Konkola Copper Mines plc ("Konkola"), a Zambian company that operated the Nchanga copper mine in Zambia, and Vedanta Resources plc ("Vedanta"), an English registered company that owned a majority share in Konkola.

The Claimants were a group of around 1,800 Zambian citizens bringing a claim in relation to personal injury, property damage and loss of income arising from pollution allegedly caused by the activities at the copper mine. The claim was primarily pleaded in negligence.

In August 2015 the High Court granted an application by the claimants to serve the claim out of the jurisdiction on Konkola. In response, Vedanta applied for a declaration that the court did not have jurisdiction to try the claims (or should not exercise any jurisdiction it may have), arguing that the proper forum for the dispute was plainly Zambia. Konkola applied for a similar declaration, together with an order setting aside the claim form and the order allowing service of that claim form in Zambia.

The applications were heard over three days in April 2016. The court rejected the Defendants' arguments, allowing the claims to continue in England.

The Vedanta application

The Claimants' starting point was that, under Article 4 of the Brussels Regulation Recast, Vedanta, as a UK company, could be sued in England, being the country in which it is domiciled. In Owusu v Jackson [2005] QB 801 the Court of Justice of the European Union confirmed that the doctrine of forum non conveniens has no part to play in the application of Article 4 and arguments as to whether or not an alternative court was the more convenient forum were therefore redundant. The decision in Owusu v Jackson has been applied in numerous subsequent English cases (See, for instance, Global Multimedia International Ltd v Ara Media Services [2006] EWHC 2612; UBS AG v HSH Nordbank [2009] 2 Lloyds Rep 272.). It is not necessary for a claimant to be domiciled within an EU Member State in order to take advantage of Article 4.

Owusu has taken on more significance in the light of the decision in Chandler v Cape [2012] WLR 3111, which allows the possibility of a finding that a parent company has a freestanding liability in tort for the actions of its subsidiary. The Claimants relied heavily on that decision in resisting the applications in this case.

In support of its application Vedanta argued that:

1. Owusu could be distinguished on the facts: whereas Owusu concerned a single claim arising out of one incident, this was a different case concerning claims by multiple claimants

2. Owusu was simply wrong; and

3. Article 4 was being abused by the Claimants as it was being employed as a device to obtain jurisdiction in England for the purposes of bringing claims against Konkola - a Zambian company.

The court rejected both of the first two points, concluding that Owusu applied and – unsurprisingly - was binding on it. 

In order to succeed on its abuse argument, Vedanta needed to show that the Claimants' sole purpose in bringing the claims was to oust the jurisdiction of another court, or that the joinder of Vedanta to the proceedings was an abuse of process (which would include what was characterised in CDC Hydrogen Peroxide SA v Akzo Nobel NB and others [2015] EU:C:2015:355 as a "fraudulent design" engineered to seise the English courts). The court acknowledged that the fact Vedanta was domiciled in the UK was undoubtedly one of the principal reasons for issuing proceedings against it, but it could not find that this was the sole reason. The court also noted the practical reality that Vedanta would not have been bound by any judgment of the Zambian courts. If the litigation were conducted in Zambia, therefore, there was a real risk that Vedanta may have put Konkola into liquidation to avoid paying out to the Claimants.

The court therefore also rejected the third argument and the Vedanta application was dismissed.

 
The Konkola application

Konkola had been served in Zambia on the basis of paragraph 3.1(3) of Practice Direction 6B (the so-called "necessary or proper party" gateway), i.e. that Konkola was a necessary or property party to the claim in addition to Vedanta.

Konkola argued that:

1. The claim against it had no real prospect of success;

2. The gateway requirements were not satisfied; and

3. England was not the forum conveniens.

The court dismissed the first and second arguments, including on the basis of Chandler v Cape (referred to above).

The thrust of Konkola's argument on the third point was that this was a Zambian dispute and on this the court did agree, noting that the following factors pointed "overwhelmingly" to the conclusion that the focus of the litigation was in Zambia:

• All of the Claimants were Zambian citizens resident in Zambia;

• The claims involved personal injury or damage to land. The injuries were suffered in Zambia and the land in question was in Zambia;

• The place where the alleged tort (the discharge of material into waterways) took place was Zambia;

• The applicable law is Zambian law;

• It would be easier for the Claimants to give evidence in Zambia;

• The Claimants do not speak English and interpreters would therefore be required;

• All of Konkola's witnesses of fact were in Zambia; and

• All of the documents and regulatory records were in Zambia.

The court concluded that, absent the claim against Vedanta, England would not be the appropriate forum for the litigation. However, in this case the existence of the claim against Vedanta was decisive. The court referred in particular to Credit Agricole Indosuez v Unicof Ltd and others [2003] EWHC 2676 (Comm), where it was said that the fact of continuing proceedings in England against other defendants on the same or closely related issue "virtually concludes the question, since all courts recognise the undesirability of duplication of proceedings." The alternative in this case was two trials on the same facts and matters taking place in courts on different sides of the world, which would have been "unthinkable".

Accordingly, the court also dismissed Konkola's application.

Comment

The effect of Article 4 of the Brussels Regulation Recast and the potential liability of a parent company in relation to acts of a foreign subsidiary arising from the decision in Chandler v Cape are a potent combination, giving claimants the right to pursue claims in the UK that they otherwise may have been forced to litigate in other jurisdictions.

In this case the Claimants wished to have their claims heard in London for a number of reasons, including the fact that the Claimants would not have been able to fund their claims in Zambia (where no CFA regime exists); that there was a dearth of lawyers with suitable experience in Zambia; and that Konkola had been shielded from criminal prosecution in Zambia as a result of political connections, which obviously had the potential to affect the Claimants' ability to obtain access to justice in Zambia.

Even in less extreme cases, however, there are many reasons why claimants may prefer to litigate in London (the quality and impartiality of the judiciary, the availability of experienced lawyers and the existence of a robust disclosure regime, to name a few) and this case gives claimants a potentially powerful avenue by which to do so.