On 10 April 2019, the UK Supreme Court passed a landmark decision in Vedanta v Lungowe and allowed claims alleging severe environmental pollution in Zambia to be tried in England. The judgment is an important development in a series of high-profile foreign direct liability cases commenced against English-domiciled parent companies and their foreign subsidiaries in the English courts. This post briefly analyses the rationale for exercising extraterritorial jurisdiction over human rights violations involving English-based multinationals.

In contrast to the Alien Tort Statute in the US, EU Member States such as the UK do not per se exercise subject matter jurisdiction over overseas wrongs committed by legal entities of transnational corporations (TNCs). The claimants are, therefore, required to establish personal jurisdiction over corporate defendants. There are a series of potentially applicable regimes governing the jurisdiction of the courts in the UK, depending on the defendant’s domicile. As a first step, English courts have jurisdiction over English-domiciled parent companies under Article 4 of Brussels I, which is the key instrument for setting the rules of jurisdiction in cross-border disputes within the EU (‘Brussels I’). Where Brussels I does not apply (i.e. when a foreign subsidiary is domiciled in a non-Member State), the English courts will rely on English common law rules to determine whether to exercise jurisdiction over the foreign defendant. Typically, the foreign subsidiary is joined in the English proceedings under the ‘necessary or proper party’ gateway. It is based solely on a sufficient connection between the claims against local and foreign co-defendants and does not require demonstration of any territorial connection between England and the foreign subsidiary.

Historically, it was possible for English courts to exercise their discretion to stay proceedings against English-domiciled parent companies on the basis of the forum non conveniens doctrine, where another clearly more ‘appropriate’ forum was available to the parties. The principles governing the exercise of that discretion are set out in Spiliada Maritime Corp v Cansulex Ltd and involve a two-stage inquiry. The first requires consideration of the natural forum for trying claims against defendants in the dispute. It involves looking at where the litigation has its most real and substantial connection. Relevant factors include the place where the tort was committed, the applicable law, the location of witnesses and experts, etc. Even if the court concludes that the natural forum for the dispute is not England that is not the end of the matter. Under the second limb of the Spiliada principle, the English courts consider if they should nevertheless exercise jurisdiction in cases when the claimants would be denied justice in the foreign forum.

The pioneer foreign direct liability cases were intensely litigated for several years on forum non conveniens issue. In Connelly v RTZ and Lubbe v Cape, the House of Lords (the former final court of appeal of the UK) ruled that, even though Namibia and South Africa respectively were the more appropriate fora for hearing the disputes, the English courts had jurisdiction because of the claimants’ inability to continue litigation in the foreign state due to a lack of financial resources, which amounted to a denial of justice. Although the outcome of these proceedings has been widely welcomed and even considered to be a victory for access to justice, both cases revealed that the application of the forum non conveniens in foreign direct liability claims is both time-consuming and expensive.

In 2005, however, the Court of Justice of the EU (‘CJEU’) prevented English courts from staying proceedings on the basis of forum non conveniens. In Owusu v Jackson, it was held that jurisdiction conferred by what is now Article 4 of Brussels I could not be derogated from through the exercise of domestic discretionary powers. The CJEU relied significantly on the objectives of the Brussels I regime which was to promote predictability and legal certainty within the internal market, and ruled that these would be undermined by the application of the forum non conveniens doctrine. Although the CJEU’s decision in Owusu has been the subject of extensive criticism in the UK, the English courts consider themselves bound by the  judgment and consistently refuse applications for a stay of proceedings against English-domiciled companies, even when the abuses are alleged to have taken place almost exclusively overseas.

The removal of the forum non conveniens obstacle under English common law rules by Owusu has assisted claimants in establishing jurisdiction of the English courts over an English-domiciled parent company under the Brussels I regime. It has also made it easier for claimants to sue foreign subsidiaries in England as part of the same proceedings by virtue of the ‘necessary or proper party’ gateway. Thus, although the claims against an English-domiciled parent company are no longer subject to forum non conveniens challenges, the English courts, nevertheless, are still able to exercise their discretion under forum conveniens to control the circumstances in which a claimant is permitted to serve on a foreign subsidiary out of the jurisdiction. The forum conveniens rule operates under the same Spiliada principles: identification of the natural forum and examination of access to justice in the foreign states. Until recently, the English courts tend to consider the appropriateness of the forum for the claims against the foreign subsidiary in light of the claims against English-domiciled parent companies. In Vedanta, for instance, both the High Court and Court of Appeal concluded that the existence of an arguable claim against English-domiciled parent company made England the most appropriate place for trying the claims against its foreign subsidiaries. The courts’ reasoning was grounded on the incentive to avoid parallel proceedings in two states resulting in duplication of cost and the risk of inconsistent judgments. The assertion of jurisdiction over a foreign subsidiary in foreign direct liability cases was heavily impacted by the absence of forum non conveniens control against English-domiciled parent companies. In other words, the exercise of jurisdiction over an arguable claim against an English-domiciled parent company effectively resolved the issue of jurisdiction over the foreign subsidiary.

In the last few years, victims of human rights violations from the host states and their lawyers have gained from this clash between jurisdiction over an English-domiciled parent company under Brussels I and the operation of the necessary or proper party gateway with respect to the foreign subsidiary. But things are bound to change following the Supreme Court’s ruling in Vedanta. Using a figurative style, the Supreme Court acknowledged that the mandatory application of Article 4 of Brussels I under Owusu tied one of the court’s hands behind its back and – at the same time – effectively paralysed the other. The solution to this difficulty was found in revisiting the forum conveniens inquiry under English common law rules (as opposed to derogation from Article 4 itself). In particular, the Supreme Court relied on the defendants’ consent to submit to the jurisdiction of the Zambian courts and held that the risk of irreconcilable judgments ceased to be a trump card in recognising England an appropriate forum for trying the disputes. Ultimately, even though Zambia was the proper place for litigation of the claims against both defendants, the claimants would not obtain substantial justice there. As a result, the Supreme Court allowed claims against the English-domiciled parent company and its foreign subsidiary to be tried in England.

The Supreme Court decision in Vedanta is an important step towards acknowledging the significance of access to justice considerations in litigating business-related human rights violations. The possibility of pursuing claims against multinationals in the courts of the parent companies’ countries of domicile is often the only available remedy for foreign claimants. Yet, the overall effect of the judgment remains controversial. Effectively, the Supreme Court has limited the availability of England as a forum to litigate corporate human rights violations to cases where claimants face denial of substantial justice in the host states. Uncertainty over the identification of the most appropriate forum increases the likelihood of lengthy jurisdictional battles. While one can only expect that the number of claims against English-based TNCs in the English courts will continue to grow in the coming years, the issue of jurisdiction is still a significant challenge for the individuals and local communities from the host states and their lawyers.

 

Ekaterina Aristova is a PhD in Law Candidate at the University of Cambridge. She is currently working towards preparing for submission her thesis on the tort litigation against English-domiciled parent companies and their foreign subsidiaries for the human rights violations arising in the subsidiaries’ operations.