An international mining company has appealed to the UK Supreme Court in a pollution case brought by over 1,800 Zambian villagers. The Court's upcoming decision on whether the case against Vedanta Resources and its subsidiary, Konkola Copper Mines (KCM), can proceed to trial in the UK could help clarify the law on parent company liability. It could also have major repercussions for multinationals with extractive operations abroad.
The case centres on whether a parent company can owe a duty to third parties affected by its subsidiaries' activities. In January 2019, the Supreme Court heard arguments from both Vedanta and the Zambian claimants regarding the proper jurisdiction for the trial.
The claimants, who live in the Chingola region of Zambia's Copperbelt Province, allege that Vedanta failed to supervise its copper mining subsidiary, resulting in harmful effluent being discharged into local waterways and the surrounding environment.
The claimants cite the Brussels Regulation – the rules on which courts have jurisdiction in legal disputes across the European Union. It states that 'persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State'.
"We see these companies talking a very good game on human rights, but when it really comes down to it, it seems these standards don't matter' - Marilyn Croser, CORE Director
Vedanta Resources, which until October 2018 was listed in the UK, told the Supreme Court that it is not a 'proper party' to the claim, arguing that it did not have operational control over KCM's activities. The High Court and Court of Appeal have both ruled that there is sufficient evidence that Vedanta exercised control over KCM and have allowed the suit to proceed.
However, conflicting decisions at the Court of Appeal in two similar cases, involving Royal Dutch Shell and Unilever, have highlighted a lack of clarity in the law regarding parent company liability. 'If the Supreme Court finds in favour of the claimants, there would be a very strong argument for Parliament to clarify in statute what the actual expectations of company practice are,' says Marilyn Croser, Director of CORE, a leading civil society coalition on corporate accountability. 'Otherwise it's just too easy for companies to say the right thing and then carry on with business as usual.'
Anil Agarwal, Chair of Vedanta Resources Group, met with Zambia's President Edgar Lungu in February 2019. He spoke of his company's continued commitment to Zambia's development through it's 50-year mining vision at KCM. Global Insight approached Vedanta for comment, but the company did not respond.
CORE and the International Commission of Jurists (ICJ) were granted permission to intervene in Vedanta's appeal to the Supreme Court in January 2019. Their submission argues that the Court of Appeal's 2018 ruling in the Vedanta case is supported by international standards including the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises.
The submission also notes that Vedanta describes its commitment to various international standards and guidelines on its website. 'We see these companies talking a very good game on respect for human rights, sustainability, corporate social responsibility, but when it really comes down to it, it seems these standards don't matter,' says Croser.
Kevin O'Callaghan, Co-Chair of the IBA's Business Human Rights Committee, says companies operating extra-nationally will want to pay close attention to the outcome of this case. 'These kinds of cases are opening up people's eyes to the potential consequences of the gap between what [a company] says on its website and what they're doing on the ground. Companies need to be aware of the consequence of the statements they make in terms of corporate social responsibility, or business and human rights-related initiatives.'
Carlos Lopez, Senior Legal Adviser on Business and Human Rights at the ICJ, says the Vedanta case could be instrumental in tightening UK legislation. 'This is the first case where the Supreme Court is going to take a position on a very difficult, complex issue of the possible responsibility of the parent company in relation to the communities or the neighbours to the operations of the subsidiary in a foreign country. It's crucial to have clarity in the law and on the fairness of rights and obligations of all parties, including parent companies.'
Clarification to the law could underline that a parent company has a responsibility to respect human rights through its operations and to fulfil that responsibility through due diligence according to the UNGPs – 'and if you don't do that adequately, you can be held accountable in court,' says Croser. But, she stresses, court proceedings should be a last resort: 'We want companies to take action to prevent harms from occurring, and in cases where this hasn't happened, to sit down with claimants and agree on an appropriate resolution and remedy.'
Carlos Vilhena, Co-Chair of the IBA's Mining Law Committee and a partner at Brazilian firm Pinheiro Neto, agrees: 'One would expect parent companies to take the lead in providing some sort of protection, in advance of redress through the courts,' he says. 'Creating and applying relevant policies, permanent or periodical due diligence, training, and making sure issues are dealt with immediately, are sensible actions.'
Various jurisdictions are already shoring up national law on the expectations of multinationals when it comes to human rights and environmental law. In 2018, France passed the 'Duty of Vigilance Law', placing the onus on companies to prevent risks from their activities, or those of companies they control. The Swiss Council of States will soon decide on whether companies should be required to introduce safeguards on human rights and environmental actions from their global operations.
'It seems to be that the judiciaries are getting more and more active, to provide an answer to these problems,' says Lopez. 'The law has to be able to respond to our challenges today.'