Analysis of Parent Company Liability: Vedanta Resources Case Study

This report provides a comprehensive analysis of the Vedanta Resources case, focusing on the liability of parent companies for the actions of their subsidiaries. The case involves a claim against Vedanta, the parent company of Konkola Copper Mines (KCM), for environmental damage caused by KCM's operations in Zambia. The Supreme Court addressed jurisdictional issues, determining that the English court had jurisdiction to hear the case. The report delves into the court's reasoning, emphasizing the concept of duty of care and vicarious liability. It examines the factors considered by the court in establishing Vedanta's intervention in KCM's management and operations, including sustainability reports, management agreements, and financial support. The report highlights the court's stance on the absence of a special category of negligence in parent-subsidiary relationships and its reliance on common law principles. Furthermore, it discusses the significance of the Supreme Court's decision in clarifying the extent of a parent company's liability and providing guidance for similar claims in the future, emphasizing that the English courts may have jurisdiction over subsidiaries of parent companies based in the UK. The report concludes by underscoring the importance of evidential documents in establishing the close proximity and control exerted by the parent company over its subsidiary.

Running head: LIABILITY OF PARENT COMPANY
Liability of Parent Company
Name of the Student
Name of the University
Author Note

1LIABILITY OF PARENT COMPANY
Introduction
In recent years, there has been a trend where the parties to a dispute make claims over
the overseas parent company for the wrongful act or omission of their subsidiaries, which are
based in the countries where the petitioner is situated. Such an approach has been adopted by
the victims in order to hold the parent company liable for the wrongful act of its subsidiary,
towards whom the parent company has a duty of care as per tort of negligence under common
law1.
Although the substantial issue for which this suit was instituted is yet to be
determined, yet the Supreme Court decided upon the jurisdictional aspect of the case that was
challenged by Vedanta and KCM as Lungowe dragged Vedanta (parent company of KCM)
into it and filed the suit in England, instead of Zambia where the actual cause of action arose2.
The Supreme Court determined the issue in reference to three major factors: a) there was a
real triable issue against Vedanta, b) jurisdiction of English court to sue KCM who was a
proper party to the claim, and c) Substantial justice for the claimants could be attained in
England, more than Zambia.
In this regard, it is significant to highlight the fact that a parent company holds certain
duty of care towards its overseas subsidiaries, for its regular intervention in the management
of the subsidiary and an overall control over the operations of such subsidiary. Therefore, it is
important to establish the existence of the element of duty of care and the breach of such
duty, in order to hold the subsidiary as well as the parent company liable for the adverse
consequences arising out of such breach. Here, Lungowe filed the suit against KCM
(subsidiary) as well as Vedanta (its parent company), in order to establish the parent liability
of Vedanta pertaining to the wrongful act of KCM, who discharged toxic emission from the
1 Curran, Vivian Grosswald. "Harmonizing multinational parent company liability for foreign subsidiary human
rights violations." (2016) 17 Chi. J. Int'l L. 403.
2 Vedanta Resources Plc and Konkola Copper Mines Plc v Lungowe and Others [2019] UKSC 20.

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mine (owned by KCM) into the nearby watercourse, thereby contaminating the drinking as
well as irrigational water. To decide upon the parent liability of Vedanta over KCM, the
jurisdiction of the English court was being challenged first as Lungowe had initiated the suit
in England3.
Decision of the Supreme Court: Real Triable Issue
Leaving the other issues of this case and focusing on the topic of parent liability of the
parent company, the decision of the Supreme Court, in terms of determining whether the case
had a real triable issue, was based upon the fact that whether Vedanta had sufficient
intervention into the management of eh mine owned by KCM. If the intervention was of such
category, then Vedanta could be held liable for the wrongful act of its subsidiary, KCM by
virtue of the principle of vicarious liability under the common law duty of care4.
a) No special category of Negligence for establishing Parent Liability
The Court held that there was no special category of negligence in order to establish the
parent-subsidiary relationship, but the common law duty of vicarious liability, which holds a
superior or a person in a position of control responsible for the wrongful act or omission of
his subordinate as held in Home Office v Dorset Yacht Co Ltd5. The Supreme Court
held that the claimant is only required to establish that Vedanta had a sufficient level of
intervention in KCM’s operation in regard to the mine along with the constant flow of
connection and exchange of internal documents between the parent and the subsidiary
company. It was also highlighted by the Court that it was obvious for a statutory body
superior in nature to have supervision and control over its own subsidiary, which can only be
perceived differently in rare cases.
3 Ibid.
4 Sambo, Pamela Towela. "Vedanta Resources PLC and Konkola Copper Mines PLC v Lungowe and Others
2019 UKSC 20." (2019) 2.2 SAIPAR Case Review 5.
5 Home Office v Dorset Yacht Co Ltd [1970] UKHL 2, [1970] AC 1004.

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b) Prescriptive Principles declined to be laid down by the Supreme Court
The Court denied to lay down any prescriptive principle for finding out whether the
parent company had any ‘arguable duty’ of care towards its subsidiary as it was thought to be
futile due to the prevalence of the usual model of management, supervision and control that
are found to be existing between multinational companies. The case of Chandler v Cape plc
was brought in as an example of a parent company having the set-out liability towards its
subsidiary6. In addition, the Court also cited the AAA v Unilever plc in order to discuss the
two kinds of intervention or control that a parent company exercises over it subordinate7: a)
parent company takes control over the management of the subsidiary wholly or partly along
with the participation of the subsidiary; or b) where the parent company only furnishes
necessary advice and limited help to its subsidiary pertaining to its own risk management8.
c) Parent Liability of Vedanta over KMC
In the light of the above two decisions, the Supreme Court had held that Vedanta, the
parent company had arguable duty of care towards KCM, its subsidiary as confirmed with the
help of certain evidences, like: (a) a sustainability report published by Vedanta that stated
about the responsibility of the parent company pertaining to the issues of its subsidiaries, (b)
there was a management and shareholder agreement between Vedanta and KCM that the
former would assist the later with support and supervision, (c) there was an evidence
pertaining to the health, safety and environmental training provided to the employees across
the Vedanta group, (d) evidence of Vedanta providing financial support to KCM, (e) public
statements of Vedanta in terms of its commitment towards handling the environmental
6 Chandler v Cape plc [2012] 1 WLR 3111.
7 AAA v Unilever plc [2018] EWCA Civ 1532.
8 Vedanta Resources Plc and Konkola Copper Mines Plc v Lungowe and Others [2019] UKSC 20

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challenges arising from mining work carried out by its subsidiary, KCM, and (f) high control
over KCM’s operations9.
This this regard, the Supreme Court had confirmed that Vedanta shall be held liable to
bear the responsibility of the wrongful act of its subsidiary, KCM, both of whom have been
sued for violation of duty of care towards the residents nearby the mine, that discharged toxic
emissions into the waterbody, thereby contaminating drinking and irrigational water.
Significance of the decision held by the Supreme Court, especially for the substantial
issue
By finding out the affirmative answer to the real triable issue, the Supreme Court
simply clarified that it was fair and reasonable on Lungowe’s part to bring charges against
Vedanta for being the parent company of KCM, the owner of the mine. The Supreme Court
shared certain insights pertaining to the liability of any parent company that might arising on
account of the wrongful act or omission by its subsidiary. The following elements have been
discussed at length by the Supreme Court, pertaining to this case and cases having similar
circumstances:
 The decision of the Supreme Court to declare the duty of Vedanta (parent company)
as ‘arguable’ under the common law of duty of care implies that a parent company
assisting, supervising or controlling its subsidiary wholly or partly, shall be held liable
to bear the responsibility of the harm caused by such subsidiary to a third party.
 The harm caused by the subsidiary to a third party could be arising from the breach of
duty of care under the tort of negligence or by a breach of contract, or otherwise;
however, in every case it is holding the parent company liable for such harm caused to
9 Ibid.

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the third party, provided that the parent company had control over its subsidiary to a
great extent10.
 Before the Supreme Court’s decision on the appeal by Vedanta, it was unclear as to
which extent Vedanta was to be held liable or it owed a duty of care for the wrongful
act of KCM.
 The decision broadened the scope of holding a parent company liable for the act of
negligence and causation of harm to a third party by its own subsidiary.
 The Court emphasised that whether Vedanta had a duty of care towards the claimant
was a ‘question of fact’, which could have been determined by the lower courts as
well, with the support of evidential documents stating internal transactions and
agreement between Vedanta and KCM.
Conclusion
Therefore, it could be concluded that evidential documents produced by the claimant
successfully established the fact that Vedanta and KCM was in close proximity, as Vedanta
was holding supervision and control of KCM to a great extent, thus it could be held
responsible for the negligent or wrongful act of KCM. Although it was an appeal by Vedanta
and KCM to determine the responsibility of Vedanta in this case along with the jurisdiction
of English Courts to decide about KCM, a Zambian company, yet it holds a significance
pertaining to the question of the liability of a parent company in terms of the wrongful act
committed by its subsidiary. It also highlights the fact that the English courts shall have
jurisdiction over subsidiaries of parent companies based in the UK. This decision adds
guidance on the substantive standards of parent company liability and provides adequate
clarity for claimants seeking to bring similar claims in the future.
10 Skinner, Gwynne. "Rethinking Limited Liability of Parent Corporations for Foreign Subsidiaries' Violations
of International Human Rights Law." (2015) 72 Wash. & Lee L. Rev. 1769.

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BIBLIOGRAPHY
Case Laws
Vedanta Resources Plc and Konkola Copper Mines Plc v Lungowe and Others [2019] UKSC 20
Home Office v Dorset Yacht Co Ltd [1970] UKHL 2, [1970] AC 1004
Chandler v Cape plc [2012] 1 WLR 3111
AAA v Unilever plc [2018] EWCA Civ 1532
Books/Journals
Curran, Vivian Grosswald. "Harmonizing multinational parent company liability for foreign
subsidiary human rights violations." (2016) 17 Chi. J. Int'l L. 403
Sambo, Pamela Towela. "Vedanta Resources PLC and Konkola Copper Mines PLC v Lungowe
and Others 2019 UKSC 20." (2019) 2.2 SAIPAR Case Review 5
Skinner, Gwynne. "Rethinking Limited Liability of Parent Corporations for Foreign Subsidiaries'
Violations of International Human Rights Law." (2015) 72 Wash. & Lee L. Rev. 1769