Background

The claimants were employees and former employees of Unilever Tea Kenya Limited  (UTKL), or residents living on a tea plantation that was run by UTKL. They sought to bring  a claim against Unilever and its Kenyan subsidiary, UTKL (the defendants). 

The claimants argued that they were the victims of inter-tribal violence during the 2007  Kenyan presidential elections, during which mobs came onto UTKL’s tea plantations.  From this, the claimants argued that both defendants owed them a duty of care under  the law of tort to take effective steps to protect them from this violence, which was  breached. However, for the claimants to sue UTKL in England, they needed to show that  they had a good arguable claim against Unilever. 

The initial court decision made two key rulings. 

(i) The court held that the claimants had no arguable claim against either of the  defendants. This was because no duty of care was owed by either of these companies  under the three-part test for a duty of care that was established in Caparo Industries Plc  v Dickman 1990. Caparo set out that: (a) damage must be reasonably foreseeable as a  result of the defendant’s conduct; (b) the parties must be in a relationship of proximity; and (c) it must be fair, just and reasonable to impose liability. Here, the court held that  (a) was not fulfilled and that (c) was not fulfilled because such a duty would effectively  require Unilever to act as a surrogate police force which was not fair, just and  reasonable. However, it is important to note that the court held that (b) was fulfilled:  there was sufficient proximity. 

(ii) The court held that if (i) was wrong and there was indeed a viable claim, England  would be the proper forum in which to hear the claim.

The Court of Appeal  

In the Court of Appeal, the claimants appealed against the ruling that there was no duty  of care (part (i)). Meanwhile, the defendants appealed against the ruling that the  appropriate forum would be England if there was a viable claim (part (ii)). 

The Court of Appeal emphasised how a parent company only has a duty of care in  relation to an activity of its subsidiary if the law of tort requirements are satisfied in the  particular case. The Court noted that in practice, this might occur when: the parent  company has taken over the management of the relevant activity of the subsidiary in  place of, or jointly with, the subsidiary’s own management; or where the parent  company has given relevant advice to the subsidiary about how it should manage a  particular risk. 

Here, the Court of Appeal rejected the claimants’ appeal. In fact, the Court of Appeal  held that even (b) of the Caparo test was not fulfilled: there was not sufficient proximity.  This was because UTKL’s affairs were conducted by the management of UTKL and UTKL did not receive relevant advice in relation to the matter. In practice, this meant that the Court of Appeal left any potential complaint to be heard by the Kenyan courts.

The Supreme Court 

In July 2019, the Supreme Court rejected the application of the claimants to appeal the  Court of Appeal’s decision. Two developments make this conclusion somewhat  surprising. 

Firstly, the Supreme Court granted permission to the claimants to appeal the Court of  Appeal’s decision in Okpabi v Royal Dutch Shell and the Shell Petroleum Development  Company of Nigeria 2018. In this case, the Court of Appeal had held that there was no real prospect of a duty of care being owed by a parent company in respect of its  Nigerian subsidiary’s oil pipeline operations in Nigeria which were alleged to have  caused environmental damage. The Court of Appeal viewed it as crucial that the  subsidiary retained autonomy when it came to imposing group standards, policies and  practices – the parent company merely expected the subsidiary to apply these. The Court  of Appeal also noted that reporting requirements that exist between a subsidiary and a  parent company do not imply the existence of control. 

Secondly, in Lungowe v Vedanta 2019, the Supreme Court held that a duty of care owed  by a parent company was arguable, such that jurisdiction was established. In this case,  the Supreme Court emphasised that whether a parent company owes a duty of care is a  fact-specific analysis. Lord Briggs also gave several examples of where a duty of care  might arise, including where the parent company: conducts a group’s business so that  they are carried on as if they were a single commercial undertaking; issues group  guidelines about minimising the environmental impact of inherently dangerous  activities, that contains systemic errors which, when implemented by a subsidiary, then  causes harm to third parties; takes active steps, by training, supervision and  enforcement, to see that group-wide policies are implemented by relevant subsidiaries;  and publishes materials in which it holds itself out as exercising a degree of supervision  and control of its subsidiaries, even if it does not in fact do so.  

Conclusions 

Numerous conclusions can be drawn from this discussion. Firstly, Vedanta shows that  sometimes, an alleged duty of care may be sufficiently arguable to gain jurisdiction in  the English courts. Secondly, while a parent company might seek to prevent subsidiaries  from causing harm or loss to third parties, imposing and enforcing such measures may  help to establish proximity under the Caparo test, potentially leading to liability. Finally,  the lack of clarity in this area of law creates challenges for victims and companies. 

In practice, these conclusions stand to reiterate the importance of effective governance  in relation to sustainability and human rights issues. Ardea International can help your  business to manage the risks associated with sustainability and human rights. In this  way, you can ensure that you meet your legal obligations and develop best practice  procedures.

Next Steps 

1. Consider joining our workshops on developing an environmental and human rights due diligence framework and business compliance with environmental and human rights laws
2. Consider whether you need tailored support on sustainability and human rights  issues to ensure that you meet your legal obligations and develop best practice  procedures
3. Get in touch with us at: hello@ardeainternational.com

About Ardea

We are a specialist sustainability, business and human rights consultancy with expertise in modern slavery.

If you’d like to know more about this report, or other reports we create, give us a call on: +44 (0) 1273 491423 or drop us a line: hello@ardeainternational.com