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Parent Company Liability

A Supreme Court judgement in a high-profile appeal raises important issues regarding jurisdiction and the potential liability of parent companies for damage caused by their subsidiaries. The judgement has relevance for various types of insurance including, for example, General Liability, Professional Indemnity and Environmental Liability Insurance. The ruling has wider implications, in view of the large number of English-domiciled companies which operate through overseas subsidiaries around the world.

The Supreme Court ruling in Vedanta Resources PLC and anor. v Lungowe and others [2019] UKSC 20,  centred on litigation commenced due to the alleged repeated discharge of toxic emissions from the Nchanga Copper mine (the Mine) in the Chingola district of Zambia. The claimants, who are the respondents in this appeal, are a group of 1,826 Zambian citizens living in four communities in the Chingola district. The claimants claimed their health and farming were damaged by the repeated discharge of toxic emissions from the Mine into watercourses, used for drinking and irrigation, from 2005. KCM is a public company incorporated in Zambia and is the immediate owner of the Mine. Vedanta is a company incorporated and domiciled in the UK and is the ultimate parent company of KCM.

The effect of the Supreme Court judgement is that the claimants’ claims against both Vedanta and KCM can proceed in England and confirms English courts are increasingly willing to hold the parent companies of global organisations to account for unlawful ethics breaches committed by their overseas subsidiaries. It should be considered that parental liability may be found to apply to private equity funds being liable for the actions of a funds' portfolio companies.

Following the Vedanta ruling, the Supreme Court also granted permission to appeal in the case of Okpabi and others (Appellants) v Royal Dutch Shell Plc and another (Respondents). This hearing was held in June 2020. The Claimants appealed the decision taken by the Court of Appeal that Royal Dutch Shell did not owe a duty of care towards citizens in Nigeria, whose livelihoods have allegedly been extensively affected by oil pollution, which they allege was caused by the negligence of Shell Petroleum Development Co of Nigeria Ltd ("SPDC"), a subsidiary of Royal Dutch Shell.

The appellants, some 42,500 people, argue that Royal Dutch Shell Plc did owe them a duty of care, either because it exercised significant control over material aspects of SPDC’s operations and/or assumed responsibility for SPDC’s operations. The Supreme Court's decision on this case will be closely examined.

W Denis has experts across the range of casualty insurances. To speak to a specialist, please make arrangements via Daniel.moss@wdenis.co.uk

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