Overseas Claims For Foreign Environmental Harm: Vedanta And The Canadian Context

Last month, in Vedanta Resources PLC & Another v. Lungowe & Others, the UK Supreme Court allowed Zambian citizens to proceed with a claim in the UK against a UK-based mining company for environmental contamination allegedly caused by its Zambian subsidiary. As our colleague Lee McBride has recently written, this landmark decision will be of particular interest to multinational parent companies headquartered in the UK.

Vedanta should be of interest to Canadian multinationals as well, because the case mirrors an emerging trend in Canadian case law that has seen international plaintiffs permitted to proceed with claims against Canadian parent companies for the allegedly wrongful activity of their foreign subsidiaries. While these recent cases dealt with claims of human rights abuses with respect to mining operations, the reasoning adopted by the Courts in these cases would likely equally apply to claims arising out of environmental damage caused in a foreign jurisdiction.

Vedanta's subsidiary, KCM, owned a copper mine in Zambia. Zambian claimants brought negligence and breach of statutory duty actions in the UK against Vedanta. The claim against Vedanta was based on Vedanta's alleged control and direction of KCM. Vedanta sought summary dismissal of the claim against it. In refusing to dismiss the claim, the UK Supreme Court found that there was evidence that Vedanta had "sufficiently intervened in the management of the mine owned by KCM". In other words, the Court allowed a direct negligence claim (not vicarious liability) to proceed against the parent company in its home jurisdiction, for activities conducted by its overseas subsidiary. The Court also found that the Zambian plaintiffs could not get substantive justice in Zambia.

The Canadian cases, which are summarized below, share a number of factors in common with Vedanta. In these cases, the claims:

Involve direct claims of negligence against the parent company, alleging that they supervised, directed or acquiesced in the wrong committed; Argue that the home jurisdiction is not the appropriate forum, due to deficiencies in the domestic legal system; and Rely on public statements made by the parent corporation with respect to corporate social responsibility to link the parent company to the alleged foreign wrongs. The summary of the Canadian cases is followed by some key take-aways for any business that operates internationally through subsidiaries.

Choc v. Hudbay Minerals Inc., 2013 ONSC 1414

Hudbay Minerals' wholly owned subsidiary, CGN, owned and operated a Nickel mine in Guatemala. A claim was brought against Hudbay in Ontario alleging that CGN security personnel, under the control and supervision of Hudbay, had committed...

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