The growing trend of ESG litigation is seeing stakeholders increasingly rely on existing laws in relatively innovative and novel ways to bring forward claims and create an impetus for a change in behaviour. One such approach concerns an attempt to extend the concept of parent company liability, which has implications for large, international corporations in terms of how they manage the ESG credentials and activities of their wider businesses, across multiple jurisdictions.
In this third and final part in our video series on ESG and litigation, Commercial Litigation Partner Emma Carr explores the concept of parent company liability in more detail and two key ways it is being applied: first, to include liability for "anti-ESG" actions taken by subsidiaries; and, secondly, to include liability for the actions of third-party suppliers. She discusses recent cases in different sectors – relating to different ESG issues – the key outcomes and their wider meaning.
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As we've heard, stakeholders who are wishing to bring ESG litigation against corporates are often relying on existing laws in relatively innovative and novel ways. One such way concerns an attempt to extend the concept of parent company liability.
Firstly, so as to include liability for anti ESG actions taken by subsidiaries, and secondly, to include liability for the actions of third party suppliers. So taking parent company liability for the anti ESG action of its subsidiaries first. We've seen a number of cases brought against English based parent companies on the basis of alleged environmental damages caused by their foreign based subsidiaries.
So in the case of Lungowe against Vedanta, we saw a group of Zambian claimants bring claims in negligence against their parent company for losses arising out of its subsidiary mining operations in Zambia, for pollution to waterways. Now, in that case, the Supreme Court gave permission for the claim to proceed against the parent company. In a similar vein, we've also seen claims brought against parent company Shell by a group of Nigerian claimants arising out of losses suffered due to alleged oil leaks caused by Shell's Nigerian subsidiary.
That case, too, was given permission to proceed against the parent. Now, in both cases, the Supreme Court allowed the claims to proceed through the English courts by extending the duty of care already owed by the subsidiary on to the parent company, and it rationalised doing so by assessment of the degree of control exercised by the English based parent over its subsidiary.
Now, the case of Municipio against BHP Group pushed the boundaries of parent company liability even further into the novel realm of parent company liability for harms caused by subsidiaries joint venture.
So in July 2002, we saw the Court of Appeal allow a £5 billion claim brought by hundreds of thousands of Brazilian claimants to proceed in England against BHP Groupon the basis that its subsidiary, BHP Brazil, was a 50% shareholder in a joint venture. Now the claim is set to proceed in the English courts in October 2024 with an 11-week trial. And when it does so, it'll be one of the largest opt out group actions to be brought before the English courts, with excess of 700,000 claimants.
Turning now to parent company liability in respect of suppliers. In a similar vein to subsidiaries, there's also been a recent slew of cases where the duty of care owed by parent companies has also been found to extend so as to include the actions of its third-party suppliers, where the harm was found to be reasonably foreseeable. So in the case of Begum against Maran, the widow of a deceased worker brought a claim against the parent company, based on this knowledge of unsafe working practices further down the supply chain. The Court of Appeal unanimously allowed the case to proceed in England on the basis that it was arguable that the duty of care owed by the defendant parent company could extend to the actions of foreign third parties in its supply chain.
Now whilst contrary to Begum, we've recently seen some resistance from the courts to further extending parent company liability to its suppliers, the outlook is far from clear. And so this really does remain an area of risk for corporates who operate across multi jurisdictions.
What is clear, however, is that when viewed in combination, these decisions highlight the growing risks for companies with operations based overseas and with complex supply chains, as well as the urgent need for ESG led corporate agendas and improved governance requirements through policies, procedures and audits. And particularly so, a supply chains become much more integrated.
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